The Boston Institute of Finance Mutual Fund Advisor Course: Series 6 and Series 63 Test Prep PDF
Preview The Boston Institute of Finance Mutual Fund Advisor Course: Series 6 and Series 63 Test Prep
Boston Institute of Finance Mutual Fund Advisor Course Series 6 and Series 63 Test Preparation John Wiley & Sons, Inc. Boston Institute of Finance Mutual Fund Advisor Course Boston Institute of Finance Mutual Fund Advisor Course Series 6 and Series 63 Test Preparation John Wiley & Sons, Inc. Copyright © 2005 by The Boston Institute of Finance. 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Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our Web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Boston Institute of Finance Boston Institute of Finance mutual fund advisor course: series 6 and series 63 test preparation / The Boston Institute of Finance. p. cm. ISBN-10 0-471-71234-5 (pbk.) ISBN-13 978-0-471-71234-3 (pbk.) 1. Mutual funds—Problems, exercises, etc. I. Title. HG4530.B676 2005 332.63'27' 076—dc22 2004027075 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 CONTENTS Preface ix Series 6 Test Preparation 1 Introduction 3 1 Investment Securities 9 Introduction............................................................................................. 9 Money and Capital Markets.................................................................... 9 Common Stock....................................................................................... 10 Preferred Stock....................................................................................... 10 Corporate Bonds..................................................................................... 11 Other Types of Corporate Bonds................................................................. 12 Convertible Bonds.................................................................................. 12 Zero Coupon Bonds................................................................................ 12 Interest Rate Risk.................................................................................... 13 Yields...................................................................................................... 13 Rights...................................................................................................... 13 Warrants.................................................................................................. 14 Collateralized Mortgage Obligations...................................................... 14 Interest Rates and Bond Concepts.......................................................... 14 US Government Securities...................................................................... 15 Municipal Bonds..................................................................................... 16 Money Market Instruments..................................................................... 16 Bankers’ Acceptances........................................................................... 16 Commercial Paper................................................................................ 16 Negotiable Certificates of Deposit.......................................................... 17 Interbank Market for Foreign Currencies............................................... 17 Eurodollar Bonds.................................................................................... 17 Additional Concepts............................................................................... 17 Review Questions................................................................................... 19 Answers to Review Questions................................................................ 22 2 Securities Markets 23 Introduction............................................................................................. 23 Types of Investment Risk....................................................................... 23 Economic Factors................................................................................... 25 Suitability and Risk Factors.................................................................... 25 Review Questions................................................................................... 27 Answers to Review Questions................................................................ 29 3 Open-End Investment Companies 31 Introduction............................................................................................. 31 Types of Funds....................................................................................... 32 Classes of Shares.................................................................................... 33 Mutual Fund Accounts............................................................................ 34 Distributions by Funds............................................................................ 35 Taxation of Mutual Funds....................................................................... 36 Mutual Fund Expenses............................................................................ 36 Review Concepts.................................................................................... 37 v Important Points...................................................................................... 37 Additional Concepts............................................................................... 38 Review Questions................................................................................... 40 Answers to Review Questions................................................................ 44 4 Regulation of Investment Companies 45 Introduction............................................................................................. 45 Sales Charges.......................................................................................... 46 Breakpoints............................................................................................. 46 Advertising by Funds.............................................................................. 47 Mutual Fund Sales Literature................................................................. 48 Dollar Cost Averaging............................................................................ 48 NASD Rules Concerning Investment Companies.................................. 48 Mutual Fund Sales by Banks.................................................................. 50 Additional Concepts............................................................................... 51 Review Questions................................................................................... 53 Answers to Review Questions................................................................ 57 5 Variable Annuities and Retirement Plans 59 Introduction............................................................................................. 59 Fixed Annuities....................................................................................... 59 Variable Annuities.................................................................................. 59 Additional Concepts—Variable Annuities............................................. 61 Variable Life Insurance.......................................................................... 62 Main Points—Variable Life Insurance Contracts................................... 63 Employee Retirement Income Security Act of 1974.............................. 64 Keogh Plans............................................................................................ 64 Individual Retirement Accounts............................................................. 64 Simplified Employee Pension Plan......................................................... 66 Pension and Profit Sharing Plans............................................................ 66 401(k) Plans............................................................................................ 66 403(b) Plans............................................................................................ 67 Review Questions................................................................................... 68 Answers to Review Questions................................................................ 72 6 NASD Rules and Regulations 73 Certificate of Incorporation.................................................................... 73 Bylaws of the NASD.............................................................................. 73 Advertising Rules................................................................................... 74 Broker/Dealers........................................................................................ 75 Recommendations Made to Customers.................................................. 75 Private Securities Transactions............................................................... 76 Prompt Receipt and Delivery of Securities............................................. 76 Proxy Material........................................................................................ 76 NASD Hot-Issue Rules........................................................................... 76 Charges for Services............................................................................... 77 Confirmations......................................................................................... 77 Discretionary Accounts........................................................................... 78 Dealing with Nonmembers..................................................................... 78 Other Provisions of NASD Rules........................................................... 78 vi NASD Code of Procedure....................................................................... 80 Uniform Practice Code........................................................................... 80 Confirmations or Comparisons............................................................... 80 Good Delivery of Securities................................................................... 80 Trade Date and Settlement Date............................................................. 80 Investment Companies and NASD Rules of Fair Practice..................... 81 Review Questions................................................................................... 82 Answers to Review Questions................................................................ 87 7 Federal and State Regulations 89 Securities Act of 1933............................................................................ 89 Exempted Securities under the 1933 Act................................................. 89 Red Herring Prospectus............................................................................ 90 Final Prospectus....................................................................................... 90 Effective Date of Registration Statement................................................. 90 Liabilities under the 1933 Act.................................................................. 90 The Securities Exchange Act of 1934..................................................... 91 Insider Transactions........................................................................... 91 Market Manipulation................................................................................ 92 Securities Investor Protection Act of 1970............................................. 92 State Securities Laws.............................................................................. 93 Uniform Gifts to Minors Act—Uniform Transfer to Minors Act........... 93 Review Questions................................................................................... 95 Answers to Review Questions................................................................ 97 Glossary 99 Series 6 Final Examination 105 Additional Practice Questions 1 119 Answers to Additional Practice Questions 1 122 Additional Practice Questions 2 123 Answers to Additional Practice Questions 2 126 Additional Practice Questions 3 127 Answers to Additional Practice Questions 3 130 Series 63 Test Preparation 131 Introduction 133 Important Terms..................................................................................... 134 Licensing/Registration Requirements..................................................... 138 Capital Requirements.............................................................................. 139 Recordkeeping........................................................................................ 139 Administrative Sanctions........................................................................ 140 Registration of Securities........................................................................ 141 Notification (Filing)................................................................................. 141 Coordination............................................................................................. 141 Qualification............................................................................................. 142 Registration Provisions............................................................................ 142 Denial of Registration.............................................................................. 142 Exempt Securities................................................................................... 142 vii
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