QUESTION: 5

According to FINRA rules, under which of the following circumstances, if any, is a member firm permitted to send gifts to a registered representative of another member firm?

Under no circumstances
When the value of all gifts during a period of one year does not exceed $100
When no single gift exceeds $100 and there is no limit on the number of gifts
When no single gift exceeds $100 in value and the maximum value of all gifts per year equals $250

Answer(s): B

Explanation:

FINRA Rule 3220: This rule limits gifts to $100 per person annually to prevent conflicts of interest.

Aggregate Limit: There is no provision for exceeding the $100 annual limit, regardless of the number of gifts.

Purpose: The rule ensures that gifts do not influence decisions or create unethical relationships.

Reference:

FINRA Rule 3220 (Influencing or Rewarding Employees of Others): F, I, N, R, A Rule 3220.

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QUESTION: 6

The cash value of a variable life insurance policy is affected by which of the following factors?

Changes in the beneficiary
Changes in the death benefit
Fluctuating market conditions
Contingent deferred sales charges

Answer(s): C

Explanation:

Variable Life Insurance: The cash value depends on the performance of the underlying investment options.

Fluctuating Market Conditions: Since the cash value is linked to market performance, fluctuations directly impact its value.

Beneficiary/Death Benefit Changes: These do not directly impact the cash value unless they involve additional costs or changes to premiums.

Reference:

SEC Bulletin on Variable Life Insurance: SEC Variable Insurance.

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QUESTION: 7

An investor wants to purchase additional mutual fund shares with income distributed by the fund.
Which of the following fund options permits this?

Asset reallocation
Dollar cost averaging
Dividend reinvestment
Capital gains reinvestment

Answer(s): C

Explanation:

Dividend Reinvestment Plans (DRIPs): These allow investors to automatically reinvest income distributed by the mutual fund to purchase additional shares.

Dollar Cost Averaging: Refers to systematic investments over time, not directly tied to income distributions.

Capital Gains Reinvestment: Involves reinvesting profits from the sale of fund holdings, which is distinct from dividend reinvestment.

Reference:

FINRA Mutual Fund Features: FINRA Mutual Funds.

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QUESTION: 8

An investor generally purchases an open-end mutual fund from which of the following parties?

The NYSE
The fund's custodian
The fund's underwriter
An existing shareholder

Answer(s): C

Explanation:

Open-End Mutual Funds: Shares are purchased directly from the fund or its underwriter at the current Net Asset Value (NAV), plus any applicable sales charges.

Custodian: Holds the fund's assets but does not sell shares.

NYSE and Shareholders: Open-end funds do not trade on exchanges or between individual shareholders.

Reference:

SEC Mutual Fund Basics: SEC Mutual Funds.

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QUESTION: 5

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QUESTION: 6

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QUESTION: 7

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QUESTION: 8

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