Series 6 F1: Seeking business

1. Under FINRA Rule 2210, a written communication sent to 20 retail investors within a 30 calendar-day period is classified as what?

1. Retail communication
2. Correspondence
3. Institutional communication
4. Internal communication

2. A written sales piece is made available to 40 retail investors within 30 calendar days. How does Rule 2210 classify it?

1. Correspondence
2. Institutional communication
3. Retail communication
4. Internal communication

3. Before a firm uses or files a retail communication, who must approve it?

1. The firm's chief executive officer
2. A FINRA staff member
3. The fund's transfer agent
4. A registered principal of the firm

4. Which written piece is an institutional communication under Rule 2210?

1. A flyer mailed to 200 members of the general public who requested it
2. A letter sent to 10 individual customers who own the fund's shares
3. A newsletter posted on a public web page open to all visitors
4. A bulletin sent only to FINRA member firms and their registered persons

5. Under Rule 2210, which person is a retail investor?

1. Anyone who is not an institutional investor, with or without an account
2. Only a person who currently holds a funded account at the member firm
3. Only an individual who does not meet the accredited investor standard
4. Any individual with less than $1 million in total investable assets

6. Which standard does Rule 2210(d)(1)(A) apply to member communications?

1. They must receive FINRA staff approval before the first day of use
2. They must be fair and balanced and based on fair dealing and good faith
3. They must list every risk only in a separate footnote at the end
4. They must avoid comparing the product with any other product type

7. A fund brochure promises guaranteed double-digit gains every year. Which content standard does it most clearly violate?

1. The rule requiring each fund's expense ratio to be listed
2. The limit on mailing to more than 25 persons
3. The ban on promissory or exaggerated claims
4. The rule on keeping records of dates of use

8. Which statement in a retail communication is generally prohibited by Rule 2210?

1. A statement of the fund's stated investment objective and strategy
2. A disclosure of the fund's maximum sales charge and annual expenses
3. A description of the fund's ten largest holdings at quarter end
4. A prediction that a fund's recent returns will continue next year

9. A retail communication includes a customer testimonial about investment advice. What must it disclose?

1. That it may be unrepresentative and is no guarantee of future success
2. The customer's complete account history for the preceding five years
3. The date the customer first opened an account with the member firm
4. That the SEC has reviewed and endorsed the testimonial before its use

10. A retail communication compares a mutual fund with a bank certificate of deposit. What must the comparison disclose?

1. All material differences between the two products
2. Only the differences that happen to favor the fund
3. Only the fund's historical returns over the past decade
4. Only the fund's annual fees and any sales charges

11. How is correspondence supervised under Rule 2210?

1. A registered principal must approve every piece in writing before any use
2. It is subject to the supervision and review requirements of Rule 3110
3. It must be filed with FINRA within 10 business days after first use
4. It is exempt from any supervision and review by the member firm

12. Records of retail communications must include a copy of the piece and which additional item?

1. The names of each recipient who opened or read the piece
2. The total cost of producing and distributing the piece
3. The dates of first and, if applicable, last use
4. The sales revenue the piece is estimated to have generated

13. Which item is excluded from the filing requirements of Rule 2210(c)(1) through (c)(4)?

1. Retail communications on investment company rankings
2. Correspondence
3. Retail communications by a new member in its first year
4. Retail communications promoting a specific fund

14. How must a communication about a variable annuity describe the product under Rule 2211?

1. Clearly as a variable annuity, without implying it is a mutual fund
2. As a mutual fund that also carries some insurance features
3. As a bank product that pays a stated fixed rate of return
4. As a short-term, highly liquid alternative to a cash account

15. A variable annuity piece stresses easy access to your money. What must balance that claim?

1. Disclosure of withdrawal costs, tax penalties and possible principal loss
2. A statement that withdrawals are always free of any penalty or charge
3. A statement that the insurer guarantees all principal and earnings
4. A table of last year's top-performing subaccounts with their returns

16. Which statement about insurer guarantees is acceptable in variable product communications?

1. The guarantees protect the separate account's investment return
2. The guarantees depend on the insurer's claims-paying ability
3. The insurer's rating applies to the subaccounts
4. The guarantees make principal safe from market loss

17. What is the highest gross rate of return allowed in a variable life hypothetical illustration under Rule 2211?

1. 8%
2. 10%
3. 12%
4. 15%

18. What must appear before a hypothetical illustration of a variable life policy?

1. A signed waiver from the customer acknowledging the illustration's risks
2. A prominent explanation that it is hypothetical and cannot predict results
3. A rating from an independent agency covering the insurer's strength
4. A comparison with a major stock index return over ten years

19. Which describes a ranking entity under FINRA Rule 2212?

1. A source independent of the fund and its affiliates and not paid by them
2. An affiliate of the fund's investment adviser that publishes data
3. A firm paid by the fund family to rank only its own funds
4. Any registered investment adviser that manages a competing fund

20. Which basis for a fund ranking category is prohibited under Rule 2212?

1. A category based on fund asset size
2. A category based on investment objective
3. A category based on investment style
4. A category based on geographic focus

21. How current must a ranking used in a retail communication be under Rule 2212?

1. Current to the most recent fiscal year-end of the fund company
2. Current to the month-end before the communication is printed
3. Current to the end of the week before the communication is used
4. Current to the most recent calendar quarter ended before use

22. Which ranking period is not permitted under Rule 2212 unless the ranking is yield-based?

1. A period of exactly one full year
2. A period of five full years
3. A period shorter than one year
4. A period of ten full years

23. A communication shows a total return ranking for a fund that has existed 12 years. Which rankings must accompany it?

1. Rankings for 3, 6 and 12 years
2. Rankings for 1, 5 and 10 years
3. A ranking for the life of the fund only
4. Rankings for 1 and 3 years

24. When may a headline call a fund the best performer in its category?

1. Only if the fund actually ranks first in that category
2. If the fund ranks within the top quartile of its category
3. If the fund ranks among the top five in its category
4. If the fund improved on its own ranking from the prior year

25. Which condition applies to using a bond mutual fund volatility rating in a retail communication?

1. The rating must be described as a measure of default risk
2. An older rating may be used if the date is shown on it
3. The rating may rest on the issuing entity's own opinion
4. The rating may not describe volatility as a risk rating

26. A bond fund volatility rating must be accompanied by a statement that what is true?

1. The rating is guaranteed to stay the same in future quarters
2. The fund is insured against any loss of principal value
3. The rating takes the place of the fund's own prospectus
4. There is no standard method for assigning such ratings

27. How soon must a principal review a complete deferred variable annuity application after the office of supervisory jurisdiction receives it?

1. Within two business days of receipt
2. Within ten business days of receipt
3. No later than seven business days
4. Within thirty calendar days of receipt

28. Before recommending a deferred variable annuity, a representative must make sure the customer is informed of which feature?

1. That withdrawals are tax-free at any age if held in a subaccount
2. The potential tax penalty on withdrawals before age 59 1/2
3. A guaranteed minimum annual return of 5% on all contributions
4. That surrender charges never apply after the first policy year

29. In a proposed deferred variable annuity exchange, a firm must consider whether the customer had another exchange within what period?

1. The preceding 12 months
2. The preceding 24 months
3. The preceding 36 months
4. The preceding 60 months

30. An investment company advertisement that quotes performance must state which of the following?

1. That past performance is likely to repeat in coming years
2. That returns are guaranteed by the SEC if held one year
3. That performance is shown net of all applicable income taxes
4. That past performance does not guarantee future results

31. A Rule 482 advertisement must urge investors to consider which items before investing?

1. The adviser's personal investment history and track record
2. The sales charges of competing funds in the same category
3. The net income of the fund's principal underwriter
4. The fund's objectives, risks, and charges and expenses

32. What may an open-end fund advertisement under Rule 482 not contain?

1. The fund's name and its ticker symbol
2. A toll-free telephone number for questions
3. An application to invest in the fund
4. The maximum sales load and total annual expenses

33. Average annual total return in a Rule 482 advertisement must cover which periods?

1. One, three and five years, or since inception if shorter
2. One, five and ten years, or since inception if shorter
3. Three, five and ten years, or since inception if shorter
4. Year-to-date and one year, or since inception if shorter

34. A non-government, non-retail money market fund advertisement must include a statement beginning with what?

1. The Fund is insured by the FDIC up to $250,000
2. The Fund guarantees a stable $1.00 price per share
3. You could lose money by investing in the Fund
4. Your principal is protected by the Fund's sponsor

35. When a Rule 482 advertisement shows fee figures, what must it also show?

1. Only the net expense ratio after any waiver or reimbursement
2. Only the average sales load actually paid by recent investors
3. Only the Rule 12b-1 fee and the fund's management fee
4. The maximum sales load and total annual expenses before waivers

36. Which item may a Rule 134 communication include?

1. A projection of the issuer's earnings for the next fiscal year
2. A recommendation to buy the shares before the offering ends
3. Management's forecast of the stock price after the offering
4. The names of participating underwriters and their roles

37. If the registration statement is not yet effective, a Rule 134 communication must state that what is true?

1. No securities may be sold until the registration statement is effective
2. The SEC has reviewed the registration statement and approved the securities
3. The offering is exempt from registration under a federal exemption rule
4. Orders will be filled strictly in the order that they are received

38. What may generic advertising under Rule 135a not do?

1. Explain investment companies in general terms to readers
2. Name a specific investment company or its securities
3. Mention bond funds and growth funds as generic fund types
4. Invite readers to ask for more information on investing

39. Which item must a generic investment company advertisement under Rule 135a contain?

1. The fund's one-year performance compared with its benchmark index
2. The fund's maximum sales charge and its annual operating expenses
3. Name and address of a registered broker-dealer or other sponsor
4. The fund's current net asset value per share and its yield

40. Under Rule 156, investment company sales literature may be misleading if it does what?

1. States the fund's investment objective in plain language
2. Discloses the maximum sales charge in the same piece
3. Names the fund's investment adviser and its address
4. Describes benefits without equal prominence for the risks

41. Which is an example of a misleading representation about future performance under Rule 156?

1. Showing past gains in a way that implies they will repeat
2. Showing returns alongside a standard past performance legend
3. Showing returns for the one-, five- and ten-year periods
4. Stating that returns and principal value will fluctuate

42. Sales literature of an investment company is materially misleading if it does what?

1. Omits a material fact needed to keep a statement from misleading
2. Uses a type size smaller than ten points in the body of the piece
3. Is not approved by the SEC before it is first used by the firm
4. Is distributed to prospective investors by e-mail rather than mail

43. Sales literature quotes the yield of a fund that is not a money market fund. What else must it include?

1. The fund's portfolio turnover
2. Total return information
3. A third-party star rating
4. The fund's top holdings

44. What must the legend on a summary prospectus give investors?

1. The address of the SEC's electronic filing system only, with nothing more
2. A postal mailing address and nothing more for requests
3. A website, a toll-free or collect number, and an email address
4. A fax number and the address of the nearest branch office

45. On request, a fund must send a paper copy of the statutory prospectus within what time?

1. Twenty-four hours after receiving the request
2. Three business days after receiving the request
3. Seven business days after receiving the request
4. 30 calendar days after receiving the request

46. How long must a fund keep the current prospectus materials on its website after sending a summary prospectus?

1. At least 90 days after the communication is sent
2. At least 30 days after the communication is sent
3. At least 60 days after the communication is sent
4. At least 180 days after the communication is sent

47. Under Rule 506(b), how many purchasers, not counting accredited investors, may buy in any 90 calendar-day period?

1. No more than 35
2. No more than 25
3. No more than 50
4. No more than 100

48. In a Rule 506(c) offering with general solicitation, what must the issuer do?

1. Register the offering with each state before making any offer
2. Take reasonable steps to verify purchasers' accredited status
3. Limit the offering to no more than 35 purchasers in total
4. Obtain FINRA approval of the offering documents before use

49. Within what time after the first sale must an issuer relying on Rule 506 file Form D?

1. 5 calendar days
2. 30 calendar days
3. 15 calendar days
4. 15 business days

50. A natural person is an accredited investor on net worth if it exceeds what amount, excluding the primary residence?

1. $500,000
2. $1,000,000
3. $750,000
4. $2,000,000

51. Under Rule 147, for how long may resales be made only to residents of the issuer's state?

1. Six months from the issuer's sale
2. Ninety days from the issuer's sale
3. Twelve months from the issuer's sale
4. Two years from the issuer's sale

52. Which test shows an issuer is doing business within a state under Rule 147?

1. It derived at least 80% of consolidated gross revenues from the state
2. It derived at least 51% of consolidated gross revenues from the state
3. Its registered agent for service of process has an address in the state
4. At least 25% of its employees are based in the state

53. For an issuer not previously reporting, when must the preliminary prospectus reach buyers under Rule 15c2-8?

1. At least 24 hours before the confirmation is sent
2. At least 72 hours before the confirmation is sent
3. At least five business days before the order
4. At least 48 hours before the confirmation is sent

54. A taping firm under FINRA Rule 3170 must keep its telephone recordings for at least how long?

1. Twelve months from the date of the recording
2. Two years from the date of the recording
3. Three years from the date of the recording
4. Six years from the date of the recording

55. A retail communication about bank-site securities services may use which legend under Rule 3160?

1. FDIC Insured, Bank Guaranteed, May Lose Value
2. Not FDIC Insured, No Bank Guarantee, May Lose Value
3. Not FDIC Insured, Bank Guaranteed, No Risk
4. SIPC Insured, No Bank Guarantee, Principal Protected

56. When must a customer get written notice that bank-site securities are not FDIC insured?

1. At or before the time the account is opened
2. Within 30 days after the first trade is placed
3. With the first quarterly statement the customer receives
4. Only after the customer files a written complaint

57. Who must approve a municipal securities advertisement under MSRB Rule G-21 before its first use?

1. The financial advisor that represents the issuer of the securities
2. A registered representative with at least one year of experience
3. A staff member of the MSRB reviewing it before first use
4. A municipal securities principal or general securities principal

58. A 529 plan advertisement under Rule G-21 must advise investors to consider what?

1. Whether the plan balance is insured by the FDIC up to standard limits
2. Whether the plan return beats the rate on a bank savings account
3. Whether the plan guarantees a minimum return on all contributions
4. Home-state tax or other benefits available only through its own plan

59. Under MSRB Rule G-21, a form letter is sent to more than how many persons within 90 consecutive days?

1. 10
2. 35
3. 25
4. 50