Which of the following does NOT describe the Prudent Person Rule?
Answer(s): D
The Prudent Person rule is an investment standard that provides guidance for the actions of fiduciaries. The rule states that a fiduciary's investment decisions should be governed by the thinking of how a "prudent man" would conduct himself. Capital investments would be made based on preservation of capital, a reasonable amount of income, discretion and wisdom or intelligence. An executor seeking high-yield returns for the heirs of an estate does not follow the Prudent Person Rule because an estate's executor would not be seeking to invest the money of the deceased, but rather to administrate to its distribution and execution. The executor's activity would also be unethical unethical because the "high-yield investment" more than likely represents a higher risk. Prudent Person Rule stands for the preservation of the capital investment and a reasonable amount of income
If a security is listed on a national exchange or on Nasdaq at the time of its offering, which of the following represents the requirement for the delivery of a prospectus in the secondary market?
Answer(s): B
Under the Securities Act of 1933, there is NO prospectus requirement provided that the security is already listed on a national exchange, i.e., NYSE, or over the counter, listed on Nasdaq at the time of the offering
Mr. Vincent Withers is leaving the country for a few days and would like his trusted financial advisor, Raymond, to execute several securities transactions on his behalf. Which of the following is Mr. Withers required to provide Raymond?
Raymond may act or exercise discretion on Mr. Withers' behalf provided that Mr. Withers supplies a written power of attorney that grants Raymond this right. If Raymond were to execute the trades without power of attorney, he would be considered in violation of the Antifraud Provisions of the Uniform Securities Act
Name the federal legislation whose purpose was to mandate full-disclosure to investors as well as the creation of laws against fraudulent activities in the securities markets.
Answer(s): A
The Securities Act of 1933 was a piece of legislation developed following the stock market crash of 1929. Up until that point, securities laws were governed by the states. To restore investor confidence and tighten up the state laws, the Securities Act of 1933 was enacted. Generally, the act requires companies to register with the SEC and to provide relevant material information to potential investors via a prospectus and registration statement.
According to the Investment Advisors Act of 1940, the SEC requires delivery of a special program brochure to clients for which of the following types of program:
Wrap fee programs are those in which a client is charged one specified fee for the execution of transactions made within the account; the fee also includes investment advisory services. This type of program may be especially cost- efficient for an investor who executes frequent trades within the account and does not want to pay per-trade transaction fees that may add up over time. Often, the fee is assigned based on the amount of assets under management. A wrap fee program requires the delivery of a special disclosure brochure that reveals the amount of the wrap fee, the services provided for the fee, any additional fees that may be required, whether the fee is negotiable, how portfolio managers are chosen and information that the portfolio manager may receive about the client
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