FINRA Series 6 — All Questions

A person first registers as a representative with FINRA on September 15, 2026. By what date must she complete her first Regulatory Element?

• a.March 15, 2027, six months after the date she registered
• b.September 15, 2027, the first anniversary of her registration
• c.December 31, 2026, the end of the year in which she registered
• d.December 31, 2027, the end of the next calendar year✓

Under Rule 1240(a)(1), a person registering for the first time on or after January 1, 2023 completes the Regulatory Element by December 31 of the calendar year after the year of registration, and then annually by December 31. Registration in 2026 therefore makes the first deadline December 31, 2027. The rule is tied to calendar year-end rather than the registration anniversary or a six-month mark, and it does not require completion in the year of registration.FINRA Rule 1240(a)(1)

A representative misses the Regulatory Element deadline and her registration is deemed inactive. What may she still do while inactive?

• a.Receive trail commissions on transactions completed before the inactive status, unless her firm prohibits them✓
• b.Accept unsolicited customer orders, provided she does not solicit any new business from clients
• c.Solicit only investment company products, but only until she completes the Regulatory Element
• d.Service existing customers and earn commissions on any orders they place through her office

Rule 1240(a)(2) says an inactive person must cease all activities as a registered person, may not accept or solicit business and may not receive compensation for the purchase or sale of securities. The one exception is trail or residual commissions from transactions completed before the inactive status, unless the firm has a policy against them. Taking even unsolicited orders is still accepting business, and limited solicitation is not allowed.FINRA Rule 1240(a)(2)

A representative's registration has been inactive for two consecutive years because he never completed the Regulatory Element. What follows?

• a.The registration stays inactive indefinitely and returns to active as soon as he completes the Regulatory Element
• b.The registration is terminated, and he may reregister after a 12-month wait without retaking any examination
• c.FINRA administratively terminates it, and he can reactivate only by reapplying and meeting qualification requirements✓
• d.FINRA terminates the registration, but he keeps his qualification for five years under Rule 1240(c)

Rule 1240(a)(2) provides that a registration inactive for two consecutive years is administratively terminated, and the person may reactivate it only by reapplying and meeting the qualification requirements of Rules 1210 and 1220, which means re-examination unless a waiver applies. Completing the Regulatory Element no longer revives it. The five-year qualification program in Rule 1240(c) is unavailable to someone with a two-year deficiency, and the rule contains no 12-month waiting period.FINRA Rule 1240(a)(2)

A representative who held a registration category for four years terminates it. Under Rule 1240(c), how long may she maintain her qualification, and by when must she elect the program?

• a.Two years, electing only on the Form U5 filed at termination, not afterward
• b.Three years, electing within one year after the termination of registration
• c.Five years, electing within 30 days after the termination of registration
• d.Five years, electing on the Form U5 or within two years of termination✓

Rule 1240(c) lets a person who was registered in a category for at least one year before termination maintain qualification for five years after termination. The election is made at the time of the Form U5 submission or later, within two years of termination, and annual continuing education must be completed by December 31. The other options misstate the length of the period or the election window.FINRA Rule 1240(c)

A representative's employment with a member ends on Tuesday, October 13, 2026. By what date must the member file the Form U5, and what must it also do?

• a.Tuesday, October 27, 2026, giving the representative a copy when it files
• b.Friday, November 27, 2026, giving the representative a copy when it files
• c.Thursday, November 12, 2026, giving the representative a copy when it files✓
• d.Thursday, November 12, 2026, giving the representative a copy only if he asks for one

Article V, Section 3(a) of the By-Laws requires a member to give notice of termination not later than 30 days after the termination and concurrently to give the terminated person a copy of the notice as filed. Thirty days from October 13 is November 12. The copy is not optional or on request, and 14-day and 45-day deadlines do not appear in the rule.FINRA By-Laws, Article V, Section 3(a)

A representative's registration is terminated effective September 1, 2026, and she does not associate with another member. For how long can FINRA file a complaint over conduct that began before the termination?

• a.Five years after the effective date of the termination
• b.Six years after the conduct occurred, as in the arbitration limit
• c.Two years from the date the termination became effective✓
• d.One year after the Form U5 is filed with FINRA by the member

Article V, Section 4(a) of the By-Laws keeps a terminated person subject to a FINRA complaint about conduct that began before termination, provided the complaint is filed within two years after the effective date of the termination. An amendment to the termination notice that discloses possible violations can restart the two-year period. The five-year period belongs to the Rule 1240(c) program, and the six-year limit governs arbitration eligibility, not disciplinary jurisdiction.FINRA By-Laws, Article V, Section 4(a)

A dealer shows a 1,000-share bid, is hit for 600 shares, and immediately after that trade communicates a revised bid size of 400 shares. A second broker then tries to sell 1,000 shares at the bid. How many must the dealer buy?

• a.Only 400 shares, because it communicated the revised size right after completing the transaction✓
• b.Only 600 shares, the size of the trade it just completed against the quotation
• c.None, because a dealer that has just traded owes no further obligation on its bid
• d.All 1,000 shares, because a firm quotation stays firm for its full original size until the dealer withdraws it

Rule 5220 bars an offer at a stated price unless the member will trade at that price on the stated conditions. Supplementary Material .01 expects a dealer making a firm market to buy or sell at least a normal unit of trading (a round lot) at its quote unless marked otherwise, but if the dealer is in the process of effecting a transaction and immediately after completing it communicates a revised quotation size, it is not obligated beyond that revised size. Here the size is 400. The dealer cannot decline altogether, since the revised quotation is still firm, and it is not bound to the original 1,000 or limited to the 600 just traded.FINRA Rule 5220, Supplementary Material .01

Before publishing a quotation for a security, what must a member have under Rule 5210?

• a.Reasonable cause to believe the quotation is bona fide, is not fictitious and is not meant to deceive or manipulate✓
• b.A written commitment from a customer to trade at the quoted price in at least a normal unit of trading in that security
• c.A position in the security large enough to fill at least one normal unit of trading at the price
• d.Approval of the quotation by FINRA market regulation staff before it is circulated to other firms

Rule 5210 and its Supplementary Material .01 prohibit publishing or circulating a quotation unless the member has reasonable cause to believe it is a bona fide quotation, not fictitious and not published for a fraudulent, deceptive or manipulative purpose. The rule does not require a customer commitment, a minimum inventory position or advance FINRA approval; firmness of the quote is the separate subject of Rule 5220.FINRA Rule 5210, Supplementary Material .01

A small corporation opens a brokerage account through its treasurer. Besides the entity's name, what must the member maintain under Rule 4512 about who may act on the account?

• a.The Social Security numbers of each shareholder who owns more than 10% of the corporation
• b.The names of any persons authorized to transact business on behalf of the corporation✓
• c.Only the name of the officer who signed the application, since that officer binds the corporation
• d.The names of all directors of the corporation, whether or not they may transact business

Rule 4512(a)(1)(E) requires, when the customer is a corporation, partnership or other legal entity, the names of any persons authorized to transact business on behalf of the entity. Recording only the signer would omit other authorized persons. Shareholder Social Security numbers are not part of the account record, since the tax identification information in paragraph (a)(2) concerns the customer itself. Directors matter only if they are authorized to act on the account.FINRA Rule 4512(a)(1)(E)

A member opens a discretionary account and names two associated persons to exercise discretion in it. Beyond the usual account information and Rule 3260, what must the member maintain under Rule 4512?

• a.A record of the dated signature of each associated person authorized to exercise discretion✓
• b.The customer's signed consent to each individual discretionary trade, kept with the order ticket
• c.A copy of each authorized associated person's Form U4 filed with the account record
• d.The dated signature of the member's chief compliance officer approving each quarterly review

Rule 4512(a)(3) requires, for discretionary accounts, a record of the dated signature of each named associated person authorized to exercise discretion in the account, in addition to the other account information and Rule 3260. The customer gives authority once in the prior written authorization under Rule 3260(b), not trade by trade, and a Form U4 copy or a compliance officer's signature does not meet the requirement. The signature record is not required for a customer's time-and-price discretion over a definite amount of a specified security.FINRA Rule 4512(a)(3)

A firm's principal reviews discretionary accounts once a year and approves discretionary orders in a monthly batch. What does Rule 3260(c) require instead?

• a.Written approval of each discretionary order by the customer within one business day after execution
• b.A quarterly review of the account, with approval of individual orders needed only after a complaint
• c.Prompt written approval of each discretionary order and review of accounts at frequent intervals✓
• d.Written approval only of orders above the account's average trade size, with a yearly review otherwise

Rule 3260(c) requires the member or its designated person to approve each discretionary order promptly in writing and to review all discretionary accounts at frequent intervals to detect excessive transactions. A monthly batch is not prompt and a yearly review is not frequent. The customer's own approval is not what the rule calls for, and there is no size cutoff or complaint trigger.FINRA Rule 3260(c)

In March 2026 a member updates the home address on a retail customer's account, which remains open. How long must the member preserve the record of the prior address under Rule 4512?

• a.Only until the new address is entered, because superseded data need not be kept
• b.At least six years after the account closes, the period that applies to the current address
• c.At least six years after the date the address was updated, even while the account stays open✓
• d.At least three years after the update, the period for order memoranda under Rule 17a-4(b)

Supplementary Material .01 to Rule 4512 requires a member to preserve a record of customer account information that is later updated for at least six years after the date of the update. Only the last update, or the original information if it was never changed, is kept for six years after the account closes, so that period fits the current address rather than the superseded one. Three years is the order-memoranda period under Rule 17a-4(b), a different record. Superseded information is not discarded when the new entry is made.FINRA Rule 4512, Supplementary Material .01

A fund named the 'Municipal Income Fund' has a non-fundamental policy of investing at least 80% of its assets in municipal bonds. Before it changes that policy, how much notice must it give shareholders?

• a.At least 60 days' prior notice✓
• b.At least 90 days' prior notice
• c.At least 10 days' prior notice
• d.At least 30 days' prior notice

Rule 35d-1 requires a fund that uses a name suggesting a type of investment to adopt an 80% policy, and to give shareholders at least 60 days' prior notice before changing it. The notice must also cover any accompanying change of name.17 CFR 270.35d-1

An interval fund makes a periodic repurchase offer under Rule 23c-3. What range must the repurchase offer amount fall within?

• a.Not less than 5% and not more than 25% of the shares outstanding✓
• b.Not less than 1% and not more than 10% of the shares outstanding
• c.Not less than 25% and not more than 100% of the shares outstanding
• d.Not less than 10% and not more than 50% of the shares outstanding

Rule 23c-3 fixes the repurchase offer amount at no less than 5% and no more than 25% of the shares outstanding on the repurchase request deadline. That limit is what lets an interval fund offer periodic liquidity without being an open-end fund.17 CFR 270.23c-3

What must an ETF relying on Rule 6c-11 publish on its website each business day?

• a.The holdings that will form the basis of its next NAV calculation, posted before the market opens✓
• b.Its holdings as of the last quarter end, posted within 60 days after the quarter closes
• c.Its holdings each month, posted by the fifteenth day of the following month
• d.Its holdings only on request, made available to authorized participants

Rule 6c-11 requires daily disclosure on a free, public website, before regular trading opens, of the portfolio holdings that will form the basis of the next NAV calculation, along with NAV, market price and premium or discount. Lagged quarterly disclosure is how traditional mutual funds report.17 CFR 270.6c-11

A fund has a Rule 12b-1 plan. Which statement about ending the plan is correct?

• a.It may be ended only after 60 days' written notice to the SEC and a two-thirds vote of the full board of directors, including the adviser's representatives
• b.It may be ended only by the principal underwriter, since that firm is the party receiving the 12b-1 payments
• c.It may be ended only at the close of its annual term, and then only by a vote of the adviser's board of directors
• d.It may be terminated at any time, without penalty, by a majority of the independent directors or by a majority of the outstanding voting securities✓

The rule requires a 12b-1 plan to be terminable at any time, without penalty, by a vote of a majority of the directors who are not interested persons, or by a majority of the outstanding voting securities. The distributor has no power to end it.17 CFR 270.12b-1

A closed-end fund wants to borrow money by issuing a senior security representing indebtedness. What asset coverage must it have immediately after the issuance?

• a.At least 300%✓
• b.At least 150%
• c.At least 100%
• d.At least 200%

Section 18 requires asset coverage of at least 300% for a senior security representing indebtedness. The 200% figure applies to a senior security that is stock, such as preferred shares, which is the usual source of confusion.Investment Company Act of 1940 Section 18(a)(1)

Under the Investment Company Act, what is the largest share of a fund's board that may be made up of interested persons?

• a.75%, so at least 25% of the board must be independent
• b.60%, so at least 40% of the board must be independent✓
• c.50%, so at least half of the board must be independent
• d.40%, so at least 60% of the board must be independent

Section 10(a) says no registered investment company may have a board in which more than 60% of the members are interested persons. That leaves a minimum of 40% independent directors, and the 40% figure is often mistaken for the cap.Investment Company Act of 1940 Section 10(a)

A fund's investment advisory contract was approved when the fund began operating. After the first two years, the contract may stay in effect only if its continuance is approved how?

• a.Only when the advisory fee changes, by a majority of the shares voted at a meeting
• b.At least every three years, by a vote of the independent directors alone
• c.At least annually, by the board of directors or by a majority of the outstanding voting securities✓
• d.At least annually, by the SEC after reviewing the adviser's fees

Section 15(a) lets an advisory contract run for two years from its execution. After that it continues only if specifically approved at least annually by the board or by a majority of the outstanding voting securities. The SEC does not approve the contract.Investment Company Act of 1940 Section 15(a)

For a fund to be classified as diversified, what must be true of at least 75% of the value of its total assets?

• a.No more than 5% of total assets is in one issuer and the fund holds no more than 10% of that issuer's voting securities✓
• b.No more than 15% of total assets is in one issuer and the fund holds no more than 10% of that issuer's voting securities
• c.No more than 10% of total assets is in one issuer and the fund holds no more than 5% of that issuer's voting securities
• d.No more than 5% of total assets is in one issuer and the fund holds no more than 25% of that issuer's voting securities

The 75-5-10 test: 75% of assets must be in cash, government securities, other funds and securities limited to 5% of total assets per issuer and no more than 10% of an issuer's voting securities. The other 25% is unrestricted.Investment Company Act of 1940 Section 5(b)(1)

In ordinary conditions, a mutual fund must pay redemption proceeds within what period after the shares are tendered?

• a.Seven days✓
• b.Three business days
• c.Ten days
• d.Fifteen days

Section 22(e) prohibits a redeemable-security issuer from suspending the right of redemption or delaying payment for more than seven days after tender, except in listed emergencies such as an NYSE closing. Many funds pay sooner, but seven days is the legal outer limit.Investment Company Act of 1940 Section 22(e)

A customer's order to buy fund shares reaches the fund's transfer agent at 2:00 p.m. Eastern, before the 4:00 p.m. pricing time. At what price is the order executed under forward pricing?

• a.The NAV computed after the order was received, which will be the one calculated at the close of the day✓
• b.The NAV in effect at 2:00 p.m., because the fund quotes a running price during the day
• c.The NAV computed at the previous close, since the order was placed before the fund priced
• d.The NAV the fund calculates at the next opening, because orders are processed overnight

Rule 22c-1 requires orders to be priced at the NAV next computed after the fund receives them. Open-end funds do not quote an intraday price, and a customer cannot buy at a price already known.17 CFR 270.22c-1

A Rule 482 advertisement quotes a fund's average annual total return. For which periods must the performance be shown?

• a.The most recent twelve months only, since longer periods are optional
• b.One, five and ten years, or the life of the fund if it has been registered for less time✓
• c.Three, five and ten years, or the life of the fund if it has been registered for less time
• d.Year to date and the prior calendar year, with the longer periods shown on request

The rule requires standardized average annual total return for the one-, five- and ten-year periods. If the registration statement has been in effect for a shorter time, that shorter period is substituted.17 CFR 230.482

Under Rule 156, which statement in fund sales literature is most likely to be considered misleading?

• a.A summary of the fund's investment objective as described in its prospectus
• b.A chart of the fund's actual calendar-year returns with the required performance disclosure
• c.A statement implying that the fund's strong three-year gain can be expected to continue✓
• d.A table of the fund's expense ratio taken from the prospectus fee table

Rule 156 treats representations implying that future gains can be inferred from past performance as potentially misleading. Showing actual returns with proper disclosure, the stated objective and the fee table are accurate and consistent with the prospectus.17 CFR 230.156

Which person is an accredited investor on the basis of income, assuming a reasonable expectation of the same income this year?

• a.An individual who earned $190,000 in each of the last two years
• b.A married couple with joint income of $280,000 in each of the last two years
• c.An individual who earned $250,000 two years ago and $150,000 last year
• d.An individual who earned $210,000 in each of the last two years✓

An individual qualifies with income above $200,000 in each of the two most recent years, or joint income above $300,000 with a spouse. $190,000 and $280,000 fall short, and the person with one low year fails the test, which applies to each year.17 CFR 230.501

An issuer wants to advertise a Rule 506 offering to the general public. Which condition applies?

• a.The offering must be limited to residents of the state in which the issuer is based
• b.Up to 35 non-accredited investors may buy if each receives a disclosure document
• c.The issuer must file a full registration statement with the SEC before any advertising
• d.Every purchaser must be an accredited investor, and the issuer must take reasonable steps to verify that status✓

Rule 506(c) permits general solicitation but only if all purchasers are accredited and the issuer takes reasonable steps to verify it. The 35 non-accredited purchasers allowance belongs to 506(b), which bars general solicitation, and the in-state limit belongs to the intrastate exemption.17 CFR 230.506

An investor buys restricted stock directly from an issuer that has been subject to Exchange Act reporting for more than 90 days. What is the minimum holding period before the investor may resell under Rule 144?

• a.Two years
• b.Ninety days
• c.Six months✓
• d.One year

For a reporting issuer, Rule 144 requires six months to pass between the acquisition and resale. The one-year period applies when the issuer is not a reporting company.17 CFR 230.144

What is the Rule 144 volume limit for an affiliate selling over any three-month period?

• a.The greater of 10% of the shares outstanding or the average daily trading volume over the prior thirty days
• b.A flat 5,000 shares, regardless of the issuer's size or trading volume
• c.The lesser of 1% of the shares outstanding or the average weekly trading volume over the prior four calendar weeks
• d.The greater of 1% of the shares outstanding or the average weekly trading volume over the prior four calendar weeks✓

An affiliate may sell, in any three-month period, no more than the greater of 1% of the class outstanding or the average weekly reported volume over the four calendar weeks before the Form 144 is filed. The 5,000 share figure relates to the Form 144 filing threshold.17 CFR 230.144

Under the SEC's standard settlement rule, a broker-dealer may not enter into a contract for most securities transactions that provides for settlement later than when?

• a.The same business day, unless the parties agree otherwise when the trade is made
• b.The second business day after the trade date, unless the parties agree otherwise when the trade is made
• c.The third business day after the trade date, unless the parties agree otherwise when the trade is made
• d.The first business day after the trade date, unless the parties agree otherwise when the trade is made✓

Since May 2024 the standard cycle has been T+1, so settlement later than the first business day after the contract requires an express agreement at the time of the trade. T+2 was the prior cycle.17 CFR 240.15c6-1

With standard settlement at T+1, by when must a customer make full payment for a purchase in a Regulation T cash account, absent an extension?

• a.Within four business days, which is the period that applied under T+2 settlement
• b.Within one business day, since the payment must be made on the settlement date
• c.Within five business days, which is the period used before the settlement cycle was shortened
• d.Within three business days, which is the settlement cycle plus two business days✓

Reg T defines the payment period as the number of business days in the standard settlement cycle plus two business days. With a one-day cycle that is three business days. Four applied when the cycle was T+2.12 CFR 220.2; 17 CFR 240.15c6-1

In one business day a customer deposits $6,000 in currency at a broker-dealer in the morning and another $5,000 in currency in the afternoon. What is the reporting result?

• a.A report is required only if the customer makes a further deposit on the next business day
• b.The transactions are aggregated and a currency transaction report is required, because the total exceeds $10,000✓
• c.No report is required, because each deposit is below $10,000
• d.Only a suspicious activity report is required, because the deposits were separate transactions made at different times of the same day

Multiple currency transactions by or for the same person in one business day are treated as a single transaction when they total more than $10,000. A report is required even though no single deposit crossed the threshold.31 CFR 1010.313; 31 CFR 1023.311

At what minimum amount involved must a broker-dealer file a SAR when it knows or suspects that a transaction involves funds from illegal activity?

• a.There is no dollar threshold for broker-dealers
• b.Transactions involving or aggregating at least $5,000✓
• c.Transactions involving or aggregating at least $3,000
• d.Transactions involving or aggregating more than $10,000

The broker-dealer SAR rule applies to transactions that involve or aggregate funds or assets of at least $5,000. The $10,000 figure is the currency transaction report threshold, which is a different filing.31 CFR 1023.320

A broker-dealer detects facts that may require a SAR but has not identified a suspect. What is the longest it may take to file?

• a.60 calendar days from initial detection✓
• b.15 business days from initial detection
• c.90 calendar days from initial detection
• d.30 calendar days from initial detection

A SAR is due within 30 calendar days of initial detection. If no suspect has been identified then, the broker-dealer may take up to another 30 days, for a maximum of 60.31 CFR 1023.320

Under the amended Regulation S-P, how soon must a firm notify affected individuals after it becomes aware that their sensitive customer information was, or is reasonably likely to have been, accessed without authorization?

• a.Within 10 business days of becoming aware of the incident
• b.Within 72 hours of becoming aware of the incident
• c.At the next annual privacy notice mailing after the incident
• d.As soon as practicable, but not later than 30 days after becoming aware of the incident✓

The amendments require notice to affected individuals as soon as practicable and not later than 30 days after the firm becomes aware, unless the Attorney General finds the notice would create a national security or public safety risk. The 72-hour clock applies to service providers notifying the firm.17 CFR 248.30

Under the amended Regulation S-P, how quickly must a service provider notify the covered institution of a breach in security affecting a customer information system it maintains?

• a.Within 24 hours of becoming aware of the breach
• b.As soon as possible, but no later than 72 hours after becoming aware of the breach✓
• c.As soon as practicable, but no later than 30 days after becoming aware of the breach
• d.At the end of the quarter, along with its regular reporting to the firm

The firm's incident response program must require service providers to notify the firm as soon as possible and not later than 72 hours after becoming aware of a breach. The 30-day period is the deadline for the firm's notice to affected customers.17 CFR 248.30

Who must approve the initial written identity theft prevention program of a covered broker-dealer under Regulation S-ID?

• a.Only the chief compliance officer, without further approval from the board or management
• b.The firm's outside auditor, who must sign off on the red flags identified
• c.The board of directors, an appropriate committee of the board, or a designated senior management employee if there is no board✓
• d.FINRA, which reviews and approves each firm's identity theft program before it takes effect and again each time the program is revised

Regulation S-ID requires the initial written program to be approved by the board, an appropriate committee of the board, or, for a firm with no board, a designated senior management employee. Regulators do not pre-approve the program.17 CFR 248.201

For how long must a broker-dealer preserve account cards and records that relate to the terms and conditions of a customer's account?

• a.At least six years after the customer's account is closed✓
• b.For the life of the firm
• c.At least six years after the account was opened
• d.At least three years after the customer's account is closed

Rule 17a-4(c) requires account cards and records on the terms of the account to be kept at least six years after the account is closed. The clock runs from closing, not from opening.17 CFR 240.17a-4

Regulation Best Interest requires a broker-dealer to satisfy its general obligation by complying with which four component obligations?

• a.Disclosure, care, suitability and supervision
• b.Disclosure, diligence, conflict of interest and reporting
• c.Disclosure, care, conflict of interest and compliance✓
• d.Care, loyalty, candor and supervision

The general obligation is met by the disclosure obligation, the care obligation, the conflict of interest obligation and the compliance obligation. Suitability is a FINRA concept and fiduciary labels such as loyalty and candor are not the Reg BI components.17 CFR 240.15l-1

Under ERISA, a plan fiduciary must discharge duties in what manner?

• a.With the objective of maximizing short-term returns, because the plan must pay out benefits quickly
• b.Solely in the interest of participants and beneficiaries, for the exclusive purpose of providing benefits and paying reasonable plan expenses✓
• c.In the interest of the plan sponsor first, as long as participants receive the benefits promised
• d.In the interest of participants and the plan sponsor equally, so that the sponsor's required contributions to the plan are kept as low as possible

ERISA's fiduciary standard requires acting solely in the interest of participants and beneficiaries, for the exclusive purpose of providing benefits and defraying reasonable expenses, with the care of a prudent person. A fiduciary may not favor the sponsor.Employee Retirement Income Security Act of 1974 Section 404(a)(1)

How are securities issued by states and their political subdivisions treated under the Securities Act of 1933?

• a.They are exempt from registration and from the antifraud provisions
• b.They are exempt from registration, but the antifraud provisions still apply✓
• c.They are exempt from registration only if the issuer is located in the state of the buyer
• d.They must be registered with the SEC unless sold only to institutions

Municipal securities are exempt securities under Section 3(a)(2), so no registration statement is required. They remain subject to antifraud rules such as Rule 10b-5.Securities Act of 1933 Section 3(a)(2)

Under the Investment Company Act, what is a vote of a majority of the outstanding voting securities?

• a.At least 67% of all shares outstanding, regardless of how many attend
• b.A simple majority of the shares voted at the meeting, whatever the turnout
• c.67% or more of the shares present if more than 50% are present, or more than 50% of the shares outstanding, whichever is less✓
• d.More than 50% of the shares present at a meeting where holders of one-third of the outstanding shares form a quorum for the vote

The statutory definition takes whichever is less: 67% of shares present when more than half are present, or more than 50% of shares outstanding. It sets a higher bar than a simple majority of the votes cast.Investment Company Act of 1940 Section 2(a)(42)

A broker-dealer wants to share a consumer's nonpublic personal information with a nonaffiliated third party. It mails the initial notice and an opt-out form. Which wait is an example of a reasonable opportunity to opt out?

• a.Allowing the consumer to opt out within 5 business days after the notices were mailed
• b.Allowing the consumer to opt out by any reasonable means within 30 days after the notices were mailed✓
• c.Allowing the consumer to opt out only by returning a paper form, within 10 days of mailing
• d.Treating the consumer's silence at account opening as consent, with no waiting period at all

Regulation S-P gives as an example of a reasonable opportunity to opt out a 30-day period after mailing the notices, during which the consumer may opt out by mail, toll-free telephone or another reasonable means. Sharing may begin only if the consumer does not opt out.17 CFR 248.10

Which investor qualifies as an accredited investor on the basis of net worth alone, not counting any joint income?

• a.An individual with a net worth of $1.3 million, of which $200,000 is the value of her home✓
• b.An individual with a net worth of $1.2 million, of which $400,000 is the value of his home with no mortgage
• c.An individual with a net worth of $950,000 that does not include the value of his home
• d.An individual with a net worth of $1.5 million, of which $600,000 is the value of her home

The net worth test is more than $1,000,000, either alone or with a spouse, and the primary residence is excluded. Subtracting the home leaves $1.1 million in the first case, while the others leave $800,000, $900,000 and $950,000.17 CFR 230.501

An exchange-traded fund's shares trade at a premium of more than 2% to NAV for eight consecutive trading days. What must the fund do under Rule 6c-11?

• a.Do nothing further, because the website must show premiums only on the days they exceed 5%
• b.Suspend creations and redemptions with authorized participants until the premium has fallen back under 2%
• c.Post on its website a statement of the premium and a discussion of the factors believed to have contributed to it, and keep it there for at least one year✓
• d.File a current report with the SEC and mail a notice of the premium to each registered shareholder

Rule 6c-11 requires an ETF whose premium or discount exceeds 2% for more than seven consecutive trading days to say so on its website, explain the contributing factors, and keep the statement for at least one year. The rule does not suspend creations or require a mailing.17 CFR 270.6c-11

A retail investor asks a broker-dealer for its current Form CRS. How quickly must the firm deliver it?

• a.Within 60 days of the request, or with the next account statement if sooner
• b.Within 30 days of the request✓
• c.Only when the investor opens a new account, since the form is not given on request
• d.Within 5 business days of the request

A broker-dealer must deliver a current Form CRS to each retail investor within 30 days upon request. The form is also due at or before the start of a recommendation, not only at account opening.17 CFR 240.17a-14

Under Rule 30e-1, by when must a mutual fund make its complete portfolio holdings for the first and third fiscal quarters publicly accessible on the website named in its shareholder report?

• a.Within 5 business days after the board approves the quarter's financial statements
• b.No later than 60 days after the close of the quarter✓
• c.No later than 90 days after the close of the quarter
• d.No later than 30 days after the close of the quarter

Rule 30e-1 lets a fund keep its shareholder report short only if the full holdings for the first and third fiscal quarters are posted free of charge no later than 60 days after each quarter closes, and remain until 60 days after the next such quarter.17 CFR 270.30e-1