The entity that serves as the auctioneer for trades conducted on an organized exchange floor is known as a:
Answer(s): B
The entity that serves as the auctioneer for trades conducted on an organized exchange floor is known as a specialist. The specialist is assigned stocks by the exchange and is a market maker in those stocks. A registered trader is a private individual who buys and sells on his own account only. Floor brokers and commission brokers execute trades for other investors.
Uncle Scrooge (uncharacteristically) wants to set up a Section 529 college savings plan for his nephew, Louie. If he does so:
Answer(s): D
If Uncle Scrooge sets up a Section 529 college savings plan for his nephew Louie, and Louie decides not to go to college, Uncle Scrooge can name Louie's brother, Huey, as the beneficiary of the plan without any tax consequences. Unlike the Coverdell Education Savings Plan, there is no limit to the contribution that can be made, although gift taxes may apply if the contribution exceeds the threshold for gifts. Scrooge's contributions are not tax deductible, and although any withdrawals Louie makes will be free from federal taxation, different states have different rules regarding the taxation of 529 plans.
Sarah Bean is a registered representative with NewWave Investments, a family of mutual funds. She has recommended one of NewWave's funds to a client and given him a prospectus. The prospectus provides information about the fund's breakpoints and indicates that an investment of $25,000 or more will lead to a reduced front-end load. The prospectus also clearly explains the details of a letter of intent. Sarah's client invests $23,000 in the fund then and there without even opening the prospectus.Has Sarah violated any of FINRA's rules of conduct?
Yes. Sarah is required to explain the concepts of breakpoints and letters of intent to her client and her failure to do so is a violation of FINRA's rules of conduct. A registered representative selling mutual fund shares is required to explain the salient facts contained in a fund's prospectus to a client before selling him the fund shares. Sarah's failure to do so is deemed "inconsistent with just and equitable principles of trade."
After three warnings, Honest Broker-Dealer was forced to terminate Sly Conman, one of its representatives, for making inaccurate statements when offering its mutual fund products to customers.After his registration is terminated:
Answer(s): C
After his registration is terminated, Mr. Conman remains under the jurisdiction of FINRA for a period of 2 years. During this time, FINRA is able to file complaints against Mr. Conman for actions he made prior to his termination.
The "statement of additional information" (SAI) that mutual funds and closed-end funds are required to produce:
The "statement of additional information" (SAI) that mutual funds and closed-end funds are required to produce usually contains some biographical information on the officers and directors of the fund. The SAI need only be provided to prospective investors upon request, and it is not sent to shareholders of the fund. Shareholders of the fund receive annual and semiannual reports from the fund, however.
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