FINRA FINRA-SERIES-6 Online Practice Questions and Exam Preparation

FINRA FINRA-SERIES-6 Online Questions & Answers

• Question 231:

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

  A. A UIT has a fixed number of shares.
  B. UITs are actively managed.
  C. Shares of UITs trade on exchange floors.
  D. All UITs are established with a termination date.
  B. UITs are actively managed.

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  Explanation/Reference:

  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.

• Question 232:

  Which of the following statements regarding the purchase and redemption of mutual fund shares is false?

  A. Mutual fund shares may not be purchased on margin.
  B. An investor can both purchase and sell fractional shares of mutual funds.
  C. When an investor redeems his shares, the mutual fund must pay for the shares within 7 business days.
  D. If an investor places an order to buy or redeem shares of a mutual fund before 4 P.M.EST on a day when the markets are open, the price will be based on the fund's net asset value (NAV), as calculated at the end of that trading day.
  C. When an investor redeems his shares, the mutual fund must pay for the shares within 7 business days.

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  Explanation/Reference:

  The false statement regarding the purchase and redemption of mutual fund share is that when an investor redeems his shares, the mutual fund must pay for the shares within 7 business days. The mutual fund must pay for the shares within 7 calendar days. All the other statements are true.

• Question 233:

  The “catch-up provision” that has been established for both the traditional and Roth IRAs applies to people of what age?

  A. 50 and older
  B. 55 and older
  C. 60 and older
  D. 62 and older
  A. 50 and older

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  Explanation/Reference:

  The “catch-up provision” that has been established for both the traditional and Roth IRAs applies to people who are 50 and older.

• Question 234:

  Private placements are exempt from the registration requirements of the Securities Act of 1933 under the rules contained in: A. Regulation A.

  B. Regulation D.
  C. Regulation E.
  D. the Securities Exchange Act of 1934.
  B. Regulation D.

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  Explanation/Reference:

  Private placements are exempt from the registration requirements of the Securities Act of 1933 under the rules contained in Regulation D. Regulation D dictates the qualifications that must be met for the security to be exempted, such as the maximum number of unaccredited investors and the investors to whom the security may be sold. Regulation A dictates the rules to qualify an issue for a small issue exemption. The Securities Exchange Act of 1934 deals with the secondary market, not the new issue market.

• Question 235:

  The investment banker bears the risk if the securities do not sell in a(n):

  A. firm commitment underwriting agreement.
  B. best efforts agreement.
  C. all-or-nothing commitment.
  D. None of the above selections are correct. The investment banking firm is never exposed to risk if the securities don't sell.
  A. firm commitment underwriting agreement.

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  Explanation/Reference:

  The investment banker bears the risk if the securities do not sell in a firm commitment underwriting agreement. In this type of agreement, the investment banker purchases the security from the issuing firm and is fully exposed to any risk associated with the issue.

• Question 236:

  Which of the following statements regarding variable life insurance policies is false?

  A. Policyholders have voting rights similar to those of mutual fund investors.
  B. Most policies have an expense guarantee provision that establishes a firm limit on how much the insurance company can increase administrative charges.
  C. Insurance companies are required to give variable life policyholders at least 24 months from the date of purchase to switch to a traditional whole life policy without having to prove insurability.
  D. The surrender value of a variable life insurance policy will always be less than its cash value.
  D. The surrender value of a variable life insurance policy will always be less than its cash value.

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  Explanation/Reference:

  The false statement regarding variable life insurance policies is that the surrender value of a variable life insurance policy will always be less than its cash value. The surrender value of a variable life insurance policy is its cash value.

• Question 237:

  Which of the following would be a reason for a person to receive a statutory disqualification from membership in FINRA?

  A. The person is on the verge of financial insolvency.
  B. The person has been barred from membership in one of the national exchanges.
  C. The person has made a misleading statement of material fact on the membership application.
  D. All of the above are reasons for a person to receive a statutory disqualification from membership in FINRA.
  D. All of the above are reasons for a person to receive a statutory disqualification from membership in FINRA.

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  Explanation/Reference:

  All of the choices are reasons for a person to receive a statutory disqualification from membership in FINRA. A person is subject to a statutory disqualification from membership in any self-regulatory organization (SRO) if it is considered to be financially weak, if it has been barred from membership in any other SRO, or if it has made a misleading statement of material fact on the membership application. Nor is this an exhaustive list of reasons that a person would face a statutory disqualification.

• Question 238:

  Which of the following do not fall under the category of “advertisement,” as defined by FINRA?

  I. scripts used in telemarketing the products of the member firm

  II. a website maintained by the member firm

  III. research reports that the member firm distributes to both its existing clients and its prospective clients

  IV.

  sales material that a member firm distributes only to its institutional clients

  A. I only
  B. IV only
  C. I, III, and IV only
  D. III and IV only
  I. scripts used in telemarketing the products of the member firm II. a website maintained by the member firm III. research reports that the member firm distributes to both its existing clients and its prospective clients IV. sales material that a member firm distributes only to its institutional clients
  C. I, III, and IV only

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  Explanation/Reference:

  Only the materials described in Selections I, III, and IV do not fall under the category of “advertisement,” as defined by FINRA. Scripts (Selection I) and research reports (Selection II) are considered to be “sales literature,” not advertisements. Sales material that is distributed only to institutional investors (Selection IV) is in a category all by itself.

• Question 239:

  The stock of Nutrisystem, Inc. (NTRI) is selling for $17.70 when Miss Piggy places a limit order to buy the stock at $17.65. During the period the order is open, NTRI falls to $17.60 and then increases to $17.67.

  Which of the following statements is most likely to be true in this scenario?

  A. Miss Piggy bought NTRI at $17.67 a share.
  B. Miss Piggy bought the stock for no more than $17.65 a share.
  C. Miss Piggy bought the stock for no more than $17.60 a share.
  D. Miss Piggy bought the stock for $17.66 a share.
  B. Miss Piggy bought the stock for no more than $17.65 a share.

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  Explanation/Reference:

  If Miss Piggy placed an order to buy the stock of Nutrisystem (NTRI) at $17.65, the statement most likely to be true is that she bought the stock for no more than $17.65. A limit order specifies the maximum price she's willing to pay, and her order would not be executed at any price higher than $17.65. It is possible, but highly unlikely, that her order would be executed for as low as $17.60 a share.

• Question 240:

  Ms. Newbie's client, Mr. Nomad, has decided that he wants to go on an extended backpack trip through the Amazon. Since he’ll be out of touch, he has given a friend of his limited power attorney to act on his behalf. Based on this, Mr. Nomad's friend can:

  I. present Ms. Newbie with an order to purchase securities on Mr. Nomad's behalf.

  II. present Ms. Newbie with an order to sell securities on Mr. Nomad's behalf.

  III.

  request a check be issued to him so that he can send Mr. Nomad some money.

  A. I only
  B. I and II only
  C. I, II, and III
  D. none of the above. Only a relative can hold a power of attorney to engage in financial transactions for the grantor.
  I. present Ms. Newbie with an order to purchase securities on Mr. Nomad's behalf. II. present Ms. Newbie with an order to sell securities on Mr. Nomad's behalf. III. request a check be issued to him so that he can send Mr. Nomad some money.
  B. I and II only

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  Explanation/Reference:

  Mr. Nomad's friend can engage in the activities described in Selections I and II only. A limited power of attorney gives Mr. Nomad's friend the authority to buy and sell securities on Mr. Nomad's behalf, but not to make any cash withdrawals. He would need a full power of attorney to be able to do so.