FINRA Series 7 — All Questions

Under FINRA Rule 2231, what is the minimum frequency for sending account statements to a customer whose account holds positions or had activity?

• a.At least once every six months
• b.At least once every calendar year
• c.Only when the customer requests one
• d.At least once every calendar quarter✓

Rule 2231 requires a general securities member to send a statement at least once every calendar quarter to customers whose accounts held securities positions, money balances or had activity. Annual or semiannual statements fall short of that minimum, and a statement may not be conditioned on a customer request.FINRA Rule 2231

Under FINRA Rule 2360, the options disclosure document must be given to a customer no later than:

• a.Ten days after the first opening transaction in an option
• b.When the account is approved for options trading✓
• c.After the customer's first closing transaction in an option
• d.At the customer's first exercise or assignment of a contract

The Options Disclosure Document must be furnished at or before the time the account is approved for options trading. Waiting until a closing trade, ten days after an opening trade, or an exercise would let the customer trade before receiving the risk disclosure.FINRA Rule 2360

A customer's account is approved for options trading on March 3. Under FINRA Rule 2360, by when must the signed options agreement be returned?

• a.Within 15 days after approval✓
• b.Before the first opening trade
• c.Within 5 business days after approval
• d.Within 30 days after approval

Rule 2360 gives the customer 15 days after account approval to return the signed options agreement, so trading may begin before the signature is in hand. It is not a precondition to the first trade, and the 30-day and five-business-day periods are not the rule's deadline.FINRA Rule 2360

A customer is approved to write uncovered options. When must the firm furnish the special written statement for uncovered option writers?

• a.When the customer is first assigned on a short option
• b.Fifteen days after the customer returns the options agreement
• c.When the customer first buys an option to close a position
• d.At or before the first uncovered short option write✓

Rule 2360 requires the special statement on uncovered writing at or prior to the customer's initial writing of an uncovered short option. Giving it after an assignment, after a closing purchase, or after a 15-day wait would let the customer take on the risk before the warning.FINRA Rule 2360

A firm opens a margin account for a non-institutional customer. When must it provide the margin disclosure statement?

• a.At or before opening, then at least each calendar year✓
• b.Within 15 days after opening, then once every three years
• c.At opening only, with no later delivery while the account is open
• d.Before the first margin loan, and again after each margin call

Rule 2264 requires the statement prior to or at the time the margin account is opened and then at least once a calendar year. The statement is not limited to a single delivery, is not delayed until after opening, and is not tied to margin loans or margin calls.FINRA Rule 2264

A registered representative asks a customer, who is the representative's brother, for a personal loan. Under FINRA Rule 3240, the loan is:

• a.Permitted only after FINRA gives prior written approval
• b.Permitted only if it is secured by securities in his account
• c.Permitted if the firm's procedures allow loans from family members✓
• d.Prohibited, since borrowing from any customer is barred

Rule 3240 permits borrowing from a customer who is an immediate family member if the firm's written procedures allow it; no pre-approval is needed for that category. The rule does not bar every customer loan, it does not require FINRA approval, and it does not require the loan to be secured by the account's securities.FINRA Rule 3240

A registered representative proposes to take 25% of any profits in an unrelated customer's account, share no losses, and contribute no capital. Under FINRA Rule 2150, this is:

• a.Permitted if the customer and the firm both authorize it in writing
• b.Permitted because the account is a discretionary account
• c.Permitted if profits are taken only after a 12-month holding period
• d.Prohibited, since sharing must be proportional to his contribution✓

Rule 2150 allows sharing in an account's profits or losses only with prior written authorization from the member and the customer, and only in direct proportion to the person's financial contribution. A representative who contributes nothing may not share, even with both authorizations. A holding period or discretionary status does not change that result.FINRA Rule 2150

What should a firm obtain from the executor before opening an account for a deceased customer's estate?

• a.Certified letters testamentary or letters of administration✓
• b.A power of attorney that the decedent signed before death
• c.A trading authorization signed by the decedent's heirs
• d.A copy of the will that no court has certified

A firm needs proof from the probate court that the executor or administrator has authority, normally certified letters testamentary or letters of administration. A power of attorney ends at death, heirs have no authority until the estate is settled, and an uncertified will does not show that the executor has been appointed.Estate and fiduciary accounts

A firm learns that the sole owner of an individual account has died. What should it do first?

• a.Liquidate all positions and mail a check to the spouse
• b.Cancel open orders and wait for the estate documents✓
• c.Keep executing orders placed by the account's representative
• d.Move the assets at once to the person named in the will

On notice of death the firm freezes the account and cancels open orders, then waits for court-certified documents showing who may act for the estate. Continuing to trade, moving assets to a named heir, or liquidating for a spouse all act without that authority.Account administration

In 2026 a 40-year-old with $90,000 of earned income puts $5,000 in a Roth IRA and $4,000 in a traditional IRA. The 2026 combined limit is $7,500. What is the consequence of the $1,500 excess?

• a.No penalty, since the limit applies to each IRA separately
• b.A one-time 10% penalty, after which the excess is deductible
• c.A 6% excise tax for each year it remains uncorrected✓
• d.Ordinary income tax on the excess only, with no further penalty

The annual limit applies to all of a person's traditional and Roth IRAs combined. An excess contribution is subject to a 6% excise tax each year it remains uncorrected, unless it is withdrawn by the return due date. The 10% figure is the early-withdrawal penalty, which is a different charge, and the limit is not applied separately to each account.Internal Revenue Code Section 4973; IRS limits for 2026

A 62-year-old opens a first Roth IRA and takes out earnings three years later. What is the tax treatment?

• a.The earnings are taxable and also subject to the 10% penalty
• b.The earnings are taxable, with no 10% penalty applied✓
• c.The earnings are tax-free, since the owner is over 59 1/2
• d.The earnings are tax-free but the 10% penalty still applies

A qualified Roth distribution needs a five-year holding period and an event such as age 59 1/2. With only three years the withdrawal of earnings is not qualified, so the earnings are taxable. The 10% penalty applies only to early withdrawals before 59 1/2 and this owner is 62. The earnings are not tax-free, so the other options are wrong.Internal Revenue Code Section 408A

A 38-year-old takes $10,000 from a traditional IRA to buy a first home. How is the withdrawal treated?

• a.Taxable income that is also subject to the 10% penalty
• b.Tax-free, but subject to the 10% early-withdrawal penalty
• c.Taxable income, but exempt from the 10% penalty✓
• d.Tax-free and penalty-free, as with a Roth IRA distribution

Up to $10,000 over a lifetime may be taken from an IRA for a qualified first-time home purchase without the 10% additional tax, but a traditional IRA withdrawal is still ordinary income because the account is funded with pre-tax dollars. The other options either exempt it from tax or apply the penalty that the exception removes.Internal Revenue Code Section 72(t)

A firm's house maintenance requirement is 30%, above the FINRA minimum of 25%. A customer's long margin account has a market value of $50,000 and a debit balance of $36,000. What is the result?

• a.A call of $2,500
• b.A call of $11,000 to meet the 50% Regulation T level
• c.No call, since equity exceeds the 25% FINRA minimum
• d.A house maintenance call of $1,000✓

Equity is $50,000 - $36,000 = $14,000. FINRA's 25% minimum is $12,500, which is met, but the firm's 30% requirement is $15,000, so the account is $1,000 short. A firm may set house requirements above FINRA's minimum. Regulation T applies to initial purchases, not to maintenance, so $11,000 is not required. A $2,500 call has no basis in these figures.FINRA Rule 4210 (maintenance margin)

A customer with low risk tolerance plans to use $40,000 as a home down payment in 18 months. Which recommendation is most suitable?

• a.An emerging-markets stock fund
• b.A small-cap growth mutual fund
• c.Long-term zero-coupon bonds
• d.Short-term Treasury bills✓

With a short horizon and low risk tolerance the customer needs capital preservation and liquidity, which short-term Treasury bills provide. Small-cap and emerging-markets funds can lose value over 18 months, and long-term zero-coupon bonds carry large interest rate risk that could cut the price before the money is needed.Suitability (customer investment profile)

An investor in a dividend reinvestment plan receives $300 of dividends, which the plan uses to buy more shares. How is the $300 treated for tax purposes?

• a.Taxable income that also increases the cost basis✓
• b.Taxable only when the new shares are eventually sold
• c.Taxable as a capital gain in the year it is received
• d.Taxable income that leaves the cost basis unchanged

Reinvested dividends are taxed in the year paid just as if they had been received in cash. Because tax has been paid on the $300, it is added to the basis of the shares, which prevents double taxation at sale. Deferral until sale is not allowed, the dividend is not a capital gain, and leaving the basis unchanged would tax the same dollars twice.Dividend reinvestment plans

An investor bought 100 XYZ at $20 in January and 100 XYZ at $30 in June, then sells 100 shares at $35 without identifying which lot. Using the default first-in, first-out method, what is the gain?

• a.$1,000
• b.$1,500✓
• c.$3,500
• d.$500

FIFO treats the earliest shares as sold first, so the cost is $20 and the gain is ($35 - $20) x 100 = $1,500. A gain of $500 would be the later lot, which is last-in, first-out. A gain of $1,000 uses the $25 average cost. A figure of $3,500 is the sale proceeds, not the gain.Cost basis methods

An investor invests $600 each month for three months, when the share price is $10, $12 and $15. What is the investor's average cost per share?

• a.$12.00✓
• b.$12.33
• c.$13.00
• d.$11.00

The $600 buys 60, 50 and 40 shares, a total of 150 shares for $1,800, so the average cost is $12.00. A figure of $12.33 is the simple average of the three prices, which ignores that more shares were bought at lower prices. The other figures have no basis in the purchases.Dollar-cost averaging

An investor sells XYZ at a loss on March 10. Which later or earlier transaction would trigger the wash sale rule and disallow the loss?

• a.Buying XYZ shares on February 5
• b.Buying XYZ shares on February 12✓
• c.Buying XYZ shares on April 11
• d.Buying other stock on March 12

The wash sale rule covers a purchase of the same or substantially identical security within 30 days before or after the sale. February 12 is 26 days before March 10, so it counts. February 5 is 33 days before and April 11 is 32 days after, both outside the window. Another company's stock is not substantially identical.Internal Revenue Code Section 1091 (wash sales)

A customer inherits 100 shares of XYZ that the decedent bought at $20; they were worth $65 on the date of death. The customer sells them at $70. What is the result?

• a.A $5 per share gain, short-term if sold within a year
• b.A $50 per share gain, treated as long-term
• c.A $5 per share gain, treated as long-term✓
• d.A $45 per share gain, taxed as ordinary income

Inherited property receives a basis stepped up to the value at death, here $65, so the gain is $70 - $65 = $5 per share. Inherited property is automatically treated as held long term regardless of how long the heir owned it. A $50 gain uses the decedent's old basis, a short-term result ignores the automatic long-term treatment, and a capital gain is not ordinary income.Internal Revenue Code Sections 1014 and 1223

A stock closes at $20.00 and trades down to $17.90 during the next session. Under Regulation SHO Rule 201, what restriction applies to short sales?

• a.They are allowed at any price, but only by registered market makers
• b.They are barred outright through the end of the next trading day
• c.They are allowed only at a price equal to or below the last sale
• d.They must be priced above the national best bid through the next day✓

A decline of 10% or more from the prior close triggers the Rule 201 alternative uptick rule. Here the drop is 10.5%. For the remainder of that day and the next day, short sales may be executed or displayed only at a price above the current national best bid. Short selling is not banned, and a price at or below the last sale is the opposite of an uptick restriction.Regulation SHO, Rule 201

Before accepting a customer's short sale order in an equity security, a broker-dealer must have:

• a.Obtained written approval from the issuer to sell its security short
• b.Confirmed that the customer holds a long position at another firm
• c.Borrowed the security or have reasonable grounds to believe it can be borrowed✓
• d.Received a deposit equal to 100% of the short sale proceeds

The locate requirement of Rule 203(b)(1) requires the firm to have borrowed the security, arranged to borrow it, or have reasonable grounds to believe it can be borrowed so it can be delivered when due. Issuer approval, a long position elsewhere, and a full cash deposit are not part of the requirement.Regulation SHO, Rule 203(b)(1)

A clearing participant has had a fail-to-deliver position in a threshold security for 13 consecutive settlement days. Under Regulation SHO it must:

• a.Deliver restricted securities under Rule 144 to cover the fail
• b.Close the position out by buying securities of like kind and quantity✓
• c.Mark the position to market and post 50% margin
• d.Notify FINRA and carry the position for 35 more settlement days

For a threshold security, a fail-to-deliver position that persists for 13 consecutive settlement days must be closed out by purchasing securities of like kind and quantity. The participant has no 35-day extension for this purpose, restricted securities do not cure a fail, and a margin deposit does not satisfy the close-out obligation.Regulation SHO, Rule 203(b)(3)

In a Treasury auction, what price does a noncompetitive bidder pay?

• a.The average price weighted across all accepted competitive bids
• b.The price tied to the lowest accepted competitive yield
• c.The single price set by the highest accepted yield✓
• d.The when-issued price quoted on the day the auction is announced

Treasury auctions are single-price auctions. Successful competitive bidders and all noncompetitive bidders pay the price that corresponds to the highest accepted yield. A weighted average price is not used, the lowest accepted yield would correspond to a higher price than other winners pay, and a noncompetitive bidder agrees to accept the auction result rather than quoting a price or paying the when-issued price from announcement day.U.S. Treasury auctions

Three buy limit orders sit in a market: A for 500 shares at 25.10 entered at 10:01, B for 500 shares at 25.12 entered at 10:09, and C for 500 shares at 25.10 entered at 10:05. A market order to sell 500 shares arrives. Whose order trades first?

• a.All three share the fill in proportion to size
• b.A, because it was the first order entered
• c.C, because it was entered after A
• d.B, because it has the best bid price✓

Price takes priority over time: the highest bid at 25.12 trades first, and time priority only decides among orders at the same price. A would be next ahead of C. Orders are not filled pro rata in this setting.Order handling (price-time priority)

A customer enters a sell stop order for 100 shares at 48 while XYZ trades at 50. Trades then print at 49.00, 48.50, 47.90 and 47.60. Which trade makes the order a market order?

• a.The trade at 47.90✓
• b.The trade at 47.60
• c.The trade at 49.00
• d.The trade at 48.50

A sell stop is elected by a trade at or below the stop price. 49.00 and 48.50 are above 48, so they do nothing. The first trade at or below 48 is 47.90, which turns the order into a market order. The 47.60 print comes after the order is already active.Order types (sell stop)

A customer enters a sell stop limit order for 100 shares with a 48 stop and a 47.50 limit. Trades then print 48.20, 47.40, 47.30 and 47.60, and there is enough volume at 47.60 to fill the order. What happens?

• a.The order sells 100 shares at 47.60✓
• b.The order is not executed because no trade printed at exactly the 48.00 stop price
• c.The order sells 100 shares at 47.40, the price of the trade that elected it
• d.The order sells 100 shares at 48.00, the stop price, as soon as the stop is touched

The 48.20 print is above the stop and does nothing. The 47.40 trade is at or below the 48 stop, so it elects the order and turns it into a limit order to sell at 47.50 or better. The 47.30 print is below the limit, so nothing can fill there. The 47.60 print is above the limit, so the order sells at that price. A stop does not need a print at exactly the stop price, a stop-limit order never fills below its limit, so a fill at the 47.40 election price is impossible, and the order does not fill at the stop price because the stop only elects it.Order types (stop limit)

A customer buys stock on Friday, May 22, 2026. Monday, May 25 is Memorial Day and the markets are closed. Under T+1 regular-way settlement, the trade settles on:

• a.Wednesday, May 27
• b.Monday, May 25
• c.Tuesday, May 26✓
• d.Friday, May 22

Regular-way settlement is one business day after the trade date. Monday is a market holiday and is not a business day, so the next business day, Tuesday, is settlement. Monday is closed, Wednesday would be T+2, and Friday would be same-day settlement.Settlement (T+1)

An investor owns 200 shares of XYZ bought at $40 per share and receives a 5% stock dividend. What is the new cost basis per share?

• a.$38.00
• b.$42.00
• c.$40.00
• d.$38.10✓

The investor's total basis of $8,000 is spread over 210 shares, which is $38.10 per share. Basis does not stay at $40.00 because the share count rose, and it does not rise to $42.00 either. A figure of $38.00 subtracts 5% from the price and does not divide the total basis.Corporate actions (stock dividends)

Five rights are required to buy one new share at a $54 subscription price. The stock trades at $60 with rights still attached. What is the theoretical value of one right?

• a.$1.00✓
• b.$1.20
• c.$0.60
• d.$6.00

While the stock trades cum-rights, the value of a right is (market price - subscription price) / (rights needed + 1) = ($60 - $54) / 6 = $1.00. The $1.20 figure is the ex-rights formula, dividing by 5. The $6.00 figure is the whole price difference, and $0.60 divides by 10.Rights offerings

Which statement about the Dow Jones Industrial Average and the S&P 500 is correct?

• a.The Dow is price-weighted; the S&P 500 is weighted by market value✓
• b.Both indexes give each component the same weight regardless of size
• c.Both indexes are price-weighted, with the largest prices counting most
• d.The Dow is weighted by market value; the S&P 500 is price-weighted

In a price-weighted index like the Dow, higher-priced stocks have more influence. The S&P 500 weights each company by its market capitalization. The other statements reverse the two methods or describe equal weighting, which neither index uses.Market indexes

A firm commitment offering is for 10,000,000 shares. Under FINRA Rule 5110, what is the largest overallotment (greenshoe) option the underwriters may receive?

• a.500,000 shares
• b.2,000,000 shares
• c.1,500,000 shares✓
• d.1,000,000 shares

Rule 5110 limits an overallotment option to 15% of the amount of securities offered, so 15% of 10,000,000 is 1,500,000 shares. One million is 10%, two million is 20%, and 500,000 is 5%.FINRA Rule 5110

A $20 offering carries a $1.00 spread made up of a $0.20 manager's fee, a $0.20 underwriting fee and a $0.60 selling concession. A syndicate member sells 50,000 shares itself. Ignoring the manager's fee, what does it earn on those shares? (Takedown is the underwriting fee plus the selling concession.)

• a.$10,000
• b.$40,000✓
• c.$30,000
• d.$50,000

The takedown is $0.20 + $0.60 = $0.80, and 50,000 shares x $0.80 = $40,000. A figure of $30,000 counts only the selling concession. A figure of $50,000 uses the full spread, which includes the manager's fee. A figure of $10,000 counts only the underwriting fee.Underwriting compensation

How does a divided (Western) syndicate differ from an undivided (Eastern) syndicate?

• a.A Western account must sell its securities at a discount to the offer price
• b.Each member answers for the entire unsold amount of the whole offering
• c.Only municipal offerings can be sold through an Eastern account
• d.Each member answers only for its own share of the unsold securities✓

In a Western or divided account each member answers only for its own allocation of unsold securities. In an Eastern or undivided account each member is also liable for a pro rata share of other members' unsold securities. Neither type is limited to municipals, and neither requires selling at a discount.Underwriting syndicates

A quote shows a bid of 25.10 and an ask of 25.20 with a size of 5 x 3. What does the size indicate?

• a.5,000 shares are bid and 3,000 shares are offered
• b.Five buyers and three sellers are in the market
• c.500 shares are bid and 300 shares are offered✓
• d.300 shares are bid and 500 shares are offered

Quote size is stated in round lots of 100 shares, with the bid size first. The 5 x 3 size means 500 shares bid and 300 shares offered. Reversing them is wrong, 5,000 and 3,000 would require multiplying by 1,000, and size is not a count of participants.Quotations

Investor A buys 10 XYZ calls to open from Investor B, who sells 10 of the same calls to open. How does open interest in that series change?

• a.It increases by 10 contracts✓
• b.It decreases by 10 contracts
• c.It increases by 20 contracts
• d.It is unchanged

Open interest counts outstanding contracts. A new buyer and a new writer together create 10 new contracts, so open interest rises by 10, not 20. It would be unchanged only if one party were closing an existing position, and it would fall only if both parties were closing.Listed options (open interest)

A 180-day Treasury bill with $1,000 face value is quoted at a 5.00% discount rate. Using a 360-day year, what is its approximate price?

• a.$987.50
• b.$975.00✓
• c.$950.00
• d.$995.00

The discount is $1,000 x 5% x 180/360 = $25, so the price is $975.00. A price of $950.00 takes a full year's discount. A price of $987.50 takes only 90 days of discount. A price of $995.00 takes only 36 days.Treasury bills

Which entity acts as the central counterparty that clears and guarantees U.S. equity trades?

• a.National Securities Clearing Corp. (NSCC)✓
• b.The Depository Trust Company (DTC)
• c.Fixed Income Clearing Corporation (FICC)
• d.The Options Clearing Corporation (OCC)

NSCC clears equity trades and guarantees completion as central counterparty. FICC performs that role for Treasury and mortgage-backed trades, OCC clears listed options, and DTC is the depository that settles by book entry.Clearing and settlement

A company declares a 2-for-1 stock split, which is a stock distribution of more than 25%, payable on a Thursday. When does the stock begin trading ex-distribution?

• a.The last business day before the payable date
• b.The record date itself, as with a cash dividend
• c.The first full business day after the record date
• d.The first business day after the payable date✓

For stock distributions of 25% or more, Rule 11140 sets the ex-date as the first business day after the payable date, which here is Friday. The record-date rule applies to smaller distributions and cash dividends. The other dates fall before the shares are actually distributed.FINRA Rule 11140

On a price chart, a head-and-shoulders top is most often read as:

• a.A bearish signal that an uptrend may be reversing✓
• b.A signal that prices will stay in a narrow range
• c.A signal that volume will keep rising with no change in trend
• d.A bullish signal that a downtrend may be reversing

A head-and-shoulders top shows three peaks with the middle one highest. Technical analysts treat it as a sign that buying is weakening and an uptrend may turn down. A bullish reversal pattern would be the inverse formation, and neither range-bound trading nor a continuing trend is what the pattern suggests.Technical analysis

A bond's yield rises from 4.35% to 4.60%. By how many basis points did the yield increase?

• a.2.5
• b.0.25
• c.25✓
• d.250

One basis point is 0.01%, so a rise of 0.25 percentage points is 25 basis points. A value of 2.5 or 250 misplaces the decimal, and 0.25 is the change in percentage points rather than basis points.Fixed income quotations

A dealer buys 1,000 shares at $40 for its own inventory and sells them to a customer at $41.20. What is the markup as a percentage of the dealer's cost?

• a.2.9%
• b.1.2%
• c.4.0%
• d.3.0%✓

The markup is $1.20 per share over a $40 cost: $1.20 / $40 = 3.0%. A figure of 2.9% divides by the $41.20 sale price. A figure of 1.2% is the dollar markup, not a percentage. A figure of 4.0% has no basis in the numbers.FINRA Rule 2121 (markups)

A U.S. investor owns an ADR of a British company. The pound weakens against the dollar while the stock price in pounds is unchanged. What happens to the ADR's dollar value?

• a.It stays unchanged because the depositary hedges the currency
• b.It stays unchanged because the ADR trades in dollars
• c.It increases because the underlying shares trade in pounds
• d.It tends to decrease because of currency exchange risk✓

An ADR's dollar price reflects the foreign share price converted at the current exchange rate, so a weaker pound lowers the dollar value even if the pound price is steady. The pound weakening does not raise the value, trading in dollars does not remove currency exposure, and a depositary bank does not hedge holders' currency risk.American depositary receipts

XYZ closes at $50 and opens the next morning at $46 after bad news. A sell stop order at $48 was resting. What is the likely outcome?

• a.It is cancelled because the stock gapped past the stop
• b.It is elected at the open and fills near $46✓
• c.It is filled at exactly the $48 stop price
• d.It is filled at the prior close of $50 instead

A stop order becomes a market order when a trade occurs at or through the stop price. The open at $46 is below $48, so the order is elected and fills near $46, not at the stop price. A stop order is not cancelled by a gap, and an execution at the prior close would be better than the market on the open.Order types (gap openings)

A bond that is in default and trades flat is sold. How is accrued interest handled?

• a.The seller pays accrued interest to the buyer
• b.The buyer pays no accrued interest to the seller✓
• c.The buyer pays the full next coupon to the seller
• d.The buyer pays accrued interest to the settlement date

A bond trading flat, such as one in default or an income bond, has no accrued interest added to the price. The buyer does not pay accrued interest, a full coupon payment is not owed, and the seller does not pay the buyer.Bond trading (flat)

A mutual fund computes its NAV at 4:00 p.m. Eastern. An investor's purchase order reaches the fund through a broker at 4:20 p.m. Eastern. At what price does it execute?

• a.The next NAV computed after the order is received✓
• b.The prior day's closing NAV, since it was the last one computed
• c.That day's 4:00 p.m. NAV, since the order was placed that day
• d.The average of today's NAV and the next NAV computed

Rule 22c-1 requires forward pricing: an order is executed at the next NAV computed after the fund receives it. An order received after the 4:00 p.m. computation gets the next calculation. It does not get that day's NAV, the stale prior NAV, or an average.Investment Company Act Rule 22c-1

A listed company's board approves a material definitive agreement on Monday. By when must the company generally file a Form 8-K reporting it?

• a.The fifth calendar day after the event
• b.The tenth business day after the event
• c.The fourth business day after the event✓
• d.The end of the current quarter

Most Form 8-K triggering events must be reported within four business days. Calendar-day counting, waiting for quarter-end, and a ten-business-day window do not match the form's deadline.Exchange Act Form 8-K

A person becomes a director of a company with a class of registered equity securities. Within how many days must the director file an initial Form 3?

• a.2 business days after becoming an insider
• b.5 business days after the first trade
• c.30 days after the next annual meeting
• d.10 days after becoming an insider✓

The initial statement of beneficial ownership, Form 3, is due within 10 days after a person becomes an officer, director, or 10% holder. The two-business-day deadline belongs to Form 4 for later changes in ownership. The other timelines are not rules.Exchange Act Section 16(a)

An officer sells 2,000 shares of her company's stock on Monday. By when must she report the transaction on Form 4?

• a.On Form 5 with the annual statements, after the issuer's fiscal year ends
• b.Within 10 days after the end of the month in which the trade occurred
• c.Within two business days after the trade date✓
• d.Within four business days, the deadline for a current report on Form 8-K

Rule 16a-3(g)(1) requires a Section 16 insider to file Form 4 before the end of the second business day following the day the transaction was executed, so a Monday sale is reported by Wednesday. The annual Form 5 is for transactions not previously reported and is filed after the fiscal year ends. A monthly period was the old Form 4 deadline and no longer applies. Four business days is the Form 8-K deadline, which is a different filing by the issuer.Exchange Act Section 16(a); SEC Rule 16a-3(g)(1)

A director buys 1,000 shares at $40 and sells them at $46 four months later. What is the consequence under Section 16(b)?

• a.Nothing, because the shares were held over 90 days
• b.The director owes the SEC $6,000 as a fine
• c.The company may recover the $6,000 profit✓
• d.The sale is void and the shares return to the director

Section 16(b) lets the issuer recover profits from any purchase and sale, or sale and purchase, within a period of less than six months. The recovery here is 1,000 x $6 = $6,000 and goes to the company. The statute does not impose an SEC fine, void the trade, or exempt a four-month hold.Exchange Act Section 16(b)

An investor acquires 5.4% of a company's registered voting equity securities. What must the investor file, and when?

• a.A Schedule 13D within 45 days after the year ends
• b.A Form 4 within two business days of crossing 5%
• c.A Form 144 within ten calendar days of crossing 5%
• d.A Schedule 13D within five business days of crossing 5%✓

Beneficial ownership of more than 5% requires a Schedule 13D within five business days after the acquisition. Form 144 relates to sales by affiliates, and Form 4 is for directors, officers and 10% holders. The year-end timing applies to certain passive filers on Schedule 13G, not this deadline.Exchange Act Section 13(d)