STC SERIES 66 GREENLIGHT COMPLETE
EXAM
Securities that are registered through qualification may only be sold:
- ANSWER Once the registration is declared effective by the
Administrator
Securities that are registered through qualification may be sold once
the registration is declared effective by the Administrator. Note that
in choice (c), the use of the term approved is inappropriate.
Securities that are deemed effective for sale by an Administrator may
not be described as having been approved by the Administrator.
The difference between a corporation's current assets and its
current liabilities is the: - ANSWER Working capital
The amount by which a corporation's current assets exceed its
current liabilities is referred to as working capital.
Assuming an expected rate of return, a specific holding period, and a
sum to be invested, an IAR is able to determine an investment's: -
ANSWER Future value
The future value of an investment is based on the present value of the
amount invested, using a discount rate each year, and doing so over
a given period of time. The assumption is that the annual return is
reinvested at the same rate, or is compounded over the given time
period, thereby resulting in a future value that exceeds the present
value.
Which of the following types of risk is MOST associated with the
purchase of a five-year T-bond? - ANSWER Interest-rate
Interest-rate risk, which is also referred to as money-rate risk, is
,essentially the risk that if interest rates rise, the prices of the debt
securities will fall. If an investor needs to liquidate her debt
investment prior to maturity, rising interest rates reduce the value
she would receive if she sold the security in the secondary market.
Market risk is primarily associated with common stock. Since the
secondary market for Treasuries is very active, liquidity risk is not a
factor. Although legislative risk (changes in the law) could create
diminished value for the instruments, it is not likely to occur.
Disadvantages of investing in a C Corporation include which of the
following choices?
Shareholders are taxed on dividends that they receive.
The corporation is taxed on its income.
Shareholders may not deduct their share of the corporation's losses
on their personal tax returns.
Shareholders are paid last if the corporation liquidates. - ANSWER I,
II, III, and IV
All of the choices are disadvantages of investing in a C Corporation
All the following are characteristics of passive asset allocation
strategies, EXCEPT: - ANSWER Altering a portfolio in anticipation of
an economic event
A passive asset allocation strategy (e.g., buy and hold) is
characterized by low transaction costs and minimal tax
consequences. Systematic rebalancing, another passive strategy,
alters the portfolio on a monthly, quarterly, or annual basis to restore
an original strategic asset allocation if market movements have
changed it. On the other hand, active (tactical) asset allocation
strategies effect changes to a portfolio's allocation in anticipation of
economic events.
A person has established an IA as a sole proprietorship and works as
an IAR out of his home office. To help promote and manage the IA, he
,has set up a website which contains personal information about his
clients. A few weeks after setting up the website, the IAR discovers
that the website has been hacked and his customers' account
information has been stolen. What is the primary regulatory concern?
- ANSWER The IA did not prepare proper cybersecurity policies,
procedures, and measures before launching the website.
Both the SEC and state Administrators require IAs to establish
cybersecurity policies in order to protect their clients. Since the
website was hacked, the regulator's primary concern is the extent of
the IA's cybersecurity measures. The regulations don't require
websites to be password protected, despite the fact that many IAs
may find them necessary to protect client information. Also, there's
no requirement for an IA to be federally covered before creating a
website. Although websites are considered advertisements and
regulators must be notified, it's unlikely that this is the primary
regulatory concern.
A Nasdaq listed company is offering 1,000,000 shares of common
stock in State A. The Administrator in State A may:
Not require registration of the stock in State A.
Require the issuer to perform notice filing.
Require the issuer to pay a fee.
Investigate the underwriter for possible fraud in connection with the
offering. - ANSWER I and IV only
Securities that are listed on a national exchange (e.g., Nasdaq,
NYSE, or AMEX) are referred to as federal covered securities and,
therefore, are not required to be registered at the state level.
Additionally, if the federal covered security is listed on an exchange,
the state may not require the issuer to pay a fee, submit a notice
filing, or provide a consent to service of process. However, the state
Administrator may investigate any broker-dealer (including the
underwriter) that participates in the offering for fraud or deceit and
file an enforcement action if it is warranted.
, According to the Uniform Securities Act, which of the following
activities by an agent of a broker-dealer is unethical? - ANSWER
Executing orders to sell securities in a client's individual and joint
account based on instructions from the client's spouse.
Unless the client's spouse has been given specific authorization,
executing these orders is unethical. An agent may exercise
discretion over the price and/or time of execution, based on verbal
authorization from the client. Agents are allowed to accept
unsolicited orders to buy and sell securities. Agents are not required
to send all clients a preliminary prospectus, but they are required to
send a final prospectus to clients who purchase non-exempt
securities.
If an agent of a broker-dealer is granted a durable power of attorney
over a client's account, all of the following statements are TRUE,
EXCEPT - ANSWER The client must be an institution
A durable power of attorney provides the agent with the power to
manage the grantor's financial affairs even if the grantor becomes
incapacitated. With this authority (which must be in written form), the
agent of the broker-dealer may make financial decisions on behalf of
the grantor (discretion). A standard power of attorney is terminated if
the grantor becomes incapacitated. (17178)
The factors that assist in determining a client's risk tolerance
include:
Income
Age
Personality
Net worth - ANSWER I, II, III, IV
A person's risk tolerance is based on income, age, personality type,
net worth, as well as any other relevant details. For instance, family
considerations may also influence a person's risk tolerance.
EXAM
Securities that are registered through qualification may only be sold:
- ANSWER Once the registration is declared effective by the
Administrator
Securities that are registered through qualification may be sold once
the registration is declared effective by the Administrator. Note that
in choice (c), the use of the term approved is inappropriate.
Securities that are deemed effective for sale by an Administrator may
not be described as having been approved by the Administrator.
The difference between a corporation's current assets and its
current liabilities is the: - ANSWER Working capital
The amount by which a corporation's current assets exceed its
current liabilities is referred to as working capital.
Assuming an expected rate of return, a specific holding period, and a
sum to be invested, an IAR is able to determine an investment's: -
ANSWER Future value
The future value of an investment is based on the present value of the
amount invested, using a discount rate each year, and doing so over
a given period of time. The assumption is that the annual return is
reinvested at the same rate, or is compounded over the given time
period, thereby resulting in a future value that exceeds the present
value.
Which of the following types of risk is MOST associated with the
purchase of a five-year T-bond? - ANSWER Interest-rate
Interest-rate risk, which is also referred to as money-rate risk, is
,essentially the risk that if interest rates rise, the prices of the debt
securities will fall. If an investor needs to liquidate her debt
investment prior to maturity, rising interest rates reduce the value
she would receive if she sold the security in the secondary market.
Market risk is primarily associated with common stock. Since the
secondary market for Treasuries is very active, liquidity risk is not a
factor. Although legislative risk (changes in the law) could create
diminished value for the instruments, it is not likely to occur.
Disadvantages of investing in a C Corporation include which of the
following choices?
Shareholders are taxed on dividends that they receive.
The corporation is taxed on its income.
Shareholders may not deduct their share of the corporation's losses
on their personal tax returns.
Shareholders are paid last if the corporation liquidates. - ANSWER I,
II, III, and IV
All of the choices are disadvantages of investing in a C Corporation
All the following are characteristics of passive asset allocation
strategies, EXCEPT: - ANSWER Altering a portfolio in anticipation of
an economic event
A passive asset allocation strategy (e.g., buy and hold) is
characterized by low transaction costs and minimal tax
consequences. Systematic rebalancing, another passive strategy,
alters the portfolio on a monthly, quarterly, or annual basis to restore
an original strategic asset allocation if market movements have
changed it. On the other hand, active (tactical) asset allocation
strategies effect changes to a portfolio's allocation in anticipation of
economic events.
A person has established an IA as a sole proprietorship and works as
an IAR out of his home office. To help promote and manage the IA, he
,has set up a website which contains personal information about his
clients. A few weeks after setting up the website, the IAR discovers
that the website has been hacked and his customers' account
information has been stolen. What is the primary regulatory concern?
- ANSWER The IA did not prepare proper cybersecurity policies,
procedures, and measures before launching the website.
Both the SEC and state Administrators require IAs to establish
cybersecurity policies in order to protect their clients. Since the
website was hacked, the regulator's primary concern is the extent of
the IA's cybersecurity measures. The regulations don't require
websites to be password protected, despite the fact that many IAs
may find them necessary to protect client information. Also, there's
no requirement for an IA to be federally covered before creating a
website. Although websites are considered advertisements and
regulators must be notified, it's unlikely that this is the primary
regulatory concern.
A Nasdaq listed company is offering 1,000,000 shares of common
stock in State A. The Administrator in State A may:
Not require registration of the stock in State A.
Require the issuer to perform notice filing.
Require the issuer to pay a fee.
Investigate the underwriter for possible fraud in connection with the
offering. - ANSWER I and IV only
Securities that are listed on a national exchange (e.g., Nasdaq,
NYSE, or AMEX) are referred to as federal covered securities and,
therefore, are not required to be registered at the state level.
Additionally, if the federal covered security is listed on an exchange,
the state may not require the issuer to pay a fee, submit a notice
filing, or provide a consent to service of process. However, the state
Administrator may investigate any broker-dealer (including the
underwriter) that participates in the offering for fraud or deceit and
file an enforcement action if it is warranted.
, According to the Uniform Securities Act, which of the following
activities by an agent of a broker-dealer is unethical? - ANSWER
Executing orders to sell securities in a client's individual and joint
account based on instructions from the client's spouse.
Unless the client's spouse has been given specific authorization,
executing these orders is unethical. An agent may exercise
discretion over the price and/or time of execution, based on verbal
authorization from the client. Agents are allowed to accept
unsolicited orders to buy and sell securities. Agents are not required
to send all clients a preliminary prospectus, but they are required to
send a final prospectus to clients who purchase non-exempt
securities.
If an agent of a broker-dealer is granted a durable power of attorney
over a client's account, all of the following statements are TRUE,
EXCEPT - ANSWER The client must be an institution
A durable power of attorney provides the agent with the power to
manage the grantor's financial affairs even if the grantor becomes
incapacitated. With this authority (which must be in written form), the
agent of the broker-dealer may make financial decisions on behalf of
the grantor (discretion). A standard power of attorney is terminated if
the grantor becomes incapacitated. (17178)
The factors that assist in determining a client's risk tolerance
include:
Income
Age
Personality
Net worth - ANSWER I, II, III, IV
A person's risk tolerance is based on income, age, personality type,
net worth, as well as any other relevant details. For instance, family
considerations may also influence a person's risk tolerance.
