FINRA-SERIES-6 Online Practice Questions and Answers

The compensation records that FINRA member firms are required to maintain must include which of the following?

I. the names of the persons that have provided the compensation

II. names of the associated persons receiving the compensation

III. the amount of cash received

IV.

the nature and value (if known) of any non-cash compensation received

A.

I and III only

B.

II and III only

C.

II, III, and IV only

D.

I, II, III, and IV

Which of the following describes a difference between a Roth IRA and a traditional IRA?

I. Anyone with earned income can contribute to a traditional IRA, but not everyone with earned income can make contributions to a Roth IRA.

II. The contributions made to a traditional IRA may be tax deductible, but the contributions made to a Roth IRA are never tax deductible.

III. Contributions made to a Roth IRA may be withdrawn without penalty at any time whereas contributions to a traditional IRA may only be withdrawn without penalty when the contributor reaches 59 ½ or if the contributor meets some specific requirements (e.g., becomes disabled.)

IV.

When a contributor to a traditional IRA turns 70 ½, he must begin making mandatory withdrawals, but there are no mandatory withdrawals with a Roth IRA.

A.

II and III only

B.

I, II, and III only

C.

II, III, and IV only

D.

I, II, III and IV

The AGRO Mutual Fund invests in aggressive growth stocks of midcap corporations. The fund is running an advertisement on the radio that informs the listeners that AGRO earned a 22% return last year while the SandP 500 Index returned only 10%. The ad also contains information regarding how an interested investor can contain a fund prospectus.

Has AGRO violated any securities laws with this advertisement?

A. No. This would be considered a generic advertisement and not an offer to sell.

B. No. In addition to providing the listeners with its own return last year, AGRO appropriately provided the listeners with a benchmark return; thus there has been no violation of any laws.

C. Yes. Although AGRO provided the return on the SandP 500 as well as its own return, the SandP 500 Index is comprised of average risk stocks and is not an appropriate benchmark for AGRO to use.

D. Yes. AGRO is required to provide information on the specific investments it made to earn that 22% return, given that the return is unusually high.

Giant Investments is introducing a new fund to its family of funds that it plans to name the Asian Fund. Giant may do so only if:

A. no other family of mutual funds has a fund with this name.

B. the fund has a policy to invest at least 80% of its assets in investments that are economically tied to Asian countries.

C. the fund's prospectus provides the specific criteria that will be used by the fund to select its investments.

D. Giant may do so only if both B and C are true.

A person's discretionary income is:

A. the amount that can be allocated to speculative investments.

B. his income after tax.

C. the income that he has left to spend or save after having paid taxes on the income and for all of the necessities, e.g., housing, food, clothing, transportation, utilities, etc.

D. the amount of his income that is needed to pay his regular monthly bills, e.g., rent, food, gasoline, utilities, health insurance, etc.

You have a young client whose primary investment objective is to be able to retire early. Really early. She's thinking 40. She has more than sufficient income to meet her current needs for cash.

Which of the following types of stock funds would be most suitable for her?

A. balanced

B. value

C. growth

D. All of the above. All stock funds invest in stocks, which can be expected to appreciate in value.

Which of the following statements regarding a letter of intent is true?

A. An investor has 12 months in which to invest the amount stipulated in the letter.

B. Reinvested dividends and capital gain distributions count toward the amount stipulated in the letter of intent.

C. An investor who signs a letter of intent and does not invest the amount stipulated must make up the difference between the sales charge he paid and what he should have paid, plus interest.

D. A letter of intent may be backdated up to 90 days so that any purchases made during that prior time period will count toward making a breakpoint.

A fund's 12b-1 fees may not be used to pay which of the following?

A. printing prospectuses

B. compensating brokers who sell shares of the fund

C. mailing sales literature to existing and prospective customers

D. administrative expenses of the fund's investment adviser

Ms. Newbie is a newly-minted registered representative. Mr. Oldman saunters into her office, becomes infatuated with her, opens an account, and signs a document giving Ms. Newbie discretionary authority over the account. Mr. Oldman is 68 years old, retired, lives on a fixed income, and pays taxes at the lowest marginal tax rate available. His stated investment objectives are capital preservation and income. Ms. Newbie invests ¼ of his investment monies in a periodic-payment, deferred, variable annuity. Based on these facts:

A. Ms. Newbie has done a remarkable job as a newly-minted representative of allocating at least a fourth of Mr. Oldman's funds appropriately.

B. Ms. Newbie may lose her license before she gets started in the business for making an unauthorized transaction.

C. Ms. Newbie has a reasonable sexual harassment case against Mr. Oldman for putting her in such a position.

D. Although Ms. Newbie's asset allocation for Mr. Oldman is less than optimal, she is in no danger of losing her license or any other penalty, given that she has been given discretionary authority over the account.

You have just become a licensed registered representative with Fine, Howard, Fine and Associates, a broker-dealer. (Congratulations!) You have had a brokerage account with Anon Brokerage for the past ten years. In this instance, you are required to:

A. transfer the assets in your account with Anon to a Fine, Howard, Fine account and close your account with Anon.

B. provide Fine, Howard, Fine with written notification of this fact.

C. provide Anon Brokerage with written notification of your association with Fine, Howard, Fine.

D. The actions described in both B and C are requirements.