Clicky

FINRA Series 6 Practice Test

Take this free FINRA Series 6 practice exam get an idea of what is on the exam to become a  financial investment representative.

The Series 6 exam (Investment Company and Variable Contracts Products Representative Qualification Examination (IR)) tests your competency as an entry-level representative in an investment company and a representative of variable contract products. The exam tests the candidate’s knowledge of critical functions of an investment company and variable contract products such as mutual funds sales and variable annuities in such topics as: Seeks Business for the Broker-dealer from Customers and Potential Customers; Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives; Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records; Obtains and Verifies Customers’ Purchase and Sales Instructions; Processes, Completes and Confirms Transactions.

Candidates must pass the Securities Industry Essentials (SIE) exam and the Series 6 exam to obtain registration.
1 A registered representative has hired a friend to design a website for his advisory business. Websites such as these are categorized as:
Incorrect. Please choose another answer.
Websites are categorized as Retail Communications. It does not matter if an individual or firm creates them; they are considered retail communications under FINRA 2210(c)(1)(A). A tombstone advertisement gives investors basic information about a public offering that will be available in the near future. Correspondence is defined as any electronic or written communication circulated or made available to 25 or less retail investors in any 30 calendar-day period under FINRA 2210(a). Generic advertising pertains to advertising that promotes a particular firm, or securities, but without specific recommendations.
2 ACME Invest, Inc. registered with FINRA seven months ago. The company has created a billboard advertisement near the financial district in their city. When must the company file with FINRA advertising regulation?
Incorrect. Please choose another answer.
New FINRA member firms must file Retail Communications 10 business days prior to first use during their first year of operation. The one-year period begins on the date the FINRA membership is effective in the CRD system. After one year, Retail Communications can be filed within 10 business days of first use or publication under FINRA 2210(c)(1)(A).
3 All of the following are exempt from registration under the Securities Act of 1933 EXCEPT:
Incorrect. Please choose another answer.
US government securities such as notes, bonds, and bills are exempt from registration. Commercial Paper is exempt too, provided the term is 270 days or less. Bankers Acceptances are also exempt, provided the term is 180 days or less. The majority of life insurance contracts are also exempt from registration, excluding contracts that carry investment risk, such as variable life and variable annuities.
4 Jason is a Series 6 registered representative and is opening a new account. Jason MUST gather all of the following information at the time of account opening EXCEPT:
Incorrect. Please choose another answer.
All are required to be gathered at the opening of the account except the customer's choice to reinvest capital gains and dividends from their mutual fund investments. This data can be obtained later.
5 All of the following retirees may contribute to a 457 plan EXCEPT:
Incorrect. Please choose another answer.
457 plans are non-qualified, deferred compensation retirement plans offered to state, local government, and some nonprofit employees. Private sector employees do not contribute to 457 plans.
6 Which of the following regulations applies to the anti-fraud provisions governing Municipal securities?
Incorrect. Please choose another answer.
While most Municipal securities are exempt from registration under the Securities Act of 1933, the anti-fraud provisions of the Securities Exchange Act of 1934 still apply to them. The Investment Company Act of 1940 focuses on mutual funds, hedge funds, holding companies, and other types of equity funds. SEC Rule 135c pertains to advertisements.
7 Michaela is a long-term client of Jennifer's and has a substantial mutual fund portfolio. Jennifer has explained that the markets may change soon, and a more conservative approach may benefit Michaela. However, Michaela will be traveling and does not want to spend time discussing portfolio adjustments with her advisor. Michaela wants Jennifer to make the necessary adjustments when she feels the time is right; without having to discuss it each time. What does Jennifer need to have on file?
Incorrect. Please choose another answer.
Jennifer needs to have discretionary authority on this account. So, a limited Power of Attorney (POA) form signed by Michaela granting Jennifer discretionary authority to make adjustments on the portfolio is required. An LOI is a letter of instruction that broker-dealers use when receiving instructions from customers. A QIB is a qualified institutional buyer who receives less protection from securities market regulators since they are deemed to be sophisticated investors. An ODD is an options disclosure document published by the OCC (Options Clearing Corporation). It discloses the risks inherent in trading options.
8 The NAV of XYZ Balanced Growth Mutual Fund is $12.85. The POP is $13.30. What is the sales charge percentage?
Incorrect. Please choose another answer.
The sales charge percentage can be calculated by this formula:
      POP-NAV/POP 13.30 - 12.85 = 0.45. 0.45/13.30 = 3.38%
 
9 Which of the following best describes a 12b-1 fee for an open-end mutual fund?
Incorrect. Please choose another answer.
The 12b-1 fee is the yearly marketing or distribution fee of a fund. It covers the costs of selling mutual fund shares and/or providing services to shareholders. The breakpoint amount is the threshold where mutual fund load fees begin to decrease, as investment size increases. The front-end load is the sales charge on Class A mutual fund shares. Class B mutual fund shares charge a back-end load, not a front-end load. The NAV is the Net Asset Value, and the dividend yield are the total yearly dividends received divided by the NAV of the fund.
10 All of the following must be included on a trade confirmation EXCEPT:
Incorrect. Please choose another answer.
All are required except the name of the representative that executed the trade. The name, address, and phone number of the broker-dealer must be included on the trade confirmation.
11 Which of the following is not exempt from registration under the Securities Act of 1940?
Incorrect. Please choose another answer.
Fixed annuities, GO (General Obligation) muni bonds, Revenue Bonds (a type of muni bond) are all exempt from registration. However, secondary offerings of corporate securities are not exempt and require registration.
12 Gregory is 63 1/2 years old and wishes to retire at 66. He has been a long-term client and has 95% of his portfolio in equity mutual funds, with a concentration in technology and growth. His portfolio has performed well over the last decade. His concern is that the bull market is maturing. Gregory does not want downside equity volatility to change his retirement plans and will need liquidity in a few years. Which of the following is the best suggestion for him?
Incorrect. Please choose another answer.
Gregory has only 2.5 years to retirement. The best choice is B as there should be more exposure to bonds and a focus on capital preservation versus growth. Lowering the beta of the stock funds could help. Making no changes is too risky, and selling all assets to cash is too conservative. Buying put options is most likely too risky and an inappropriate strategy.
13 Regarding variable annuities, which of the following is true?
Incorrect. Please choose another answer.
Income from variable annuities is tax-deferred until one of two things happens: withdrawals begin, or the death benefit is paid to the investor (whichever comes first). Variable annuities have investment risk that the investor assumes, not the insurance company. There is no guaranteed rate of return in a variable annuity.
14 Which of the following is true regarding nonsystematic risk?
Incorrect. Please choose another answer.
Nonsystematic (unsystematic) risk pertains to the market risk of an individual investment. Diversification can help to mitigate this type of risk. An index fund that owns multiple underlying stocks can reduce this type of risk. Timing the market properly could help with timing risk, but not nonsystematic risk.
15 John calls his broker to sell his ABC mutual fund shares on Wednesday at 3 PM. The NAV after the market close on Wednesday for ABC mutual fund was $27.85. The sold price on his confirmation showed $23.67. Upon FINRA review, this trade may be designated as a(n):
Incorrect. Please choose another answer.
Mutual funds have one sell price per day: the NAV. With mutual funds, one buys at the POP and sells at the NAV. The NAV is calculated after 4 PM, once markets close. This trade was executed 15% lower than the NAV price and is clearly a broker-dealer or clearing firm error. This would be designated as a "clearly erroneous trade." A discount order fill is not a widely used term, and is not applicable to the question. A rebill aka cancel/rebill occurs when some portion of the trade is processed incorrectly; for example, when a trade has been debited or credited to the wrong account. An outlier fill simply means a fill (trade execution) that was filled away from current market price but not far enough to be considered a clearly erroneous trade (15% or more away from current market price). This can happen if an order is routed to an exchange that has low liquidity and wider bid/ask prices.

Related Links

Copyright © 2009-2025 Tests.com. All Rights Reserved.