Chapter 4 Practice Questions

1. 1. Which of the following describes a material fact that would likely need to be disclosed to a customer?
2. A. That a professional is not a Certified Financial Planner
3. B. The number of years a professional has been licensed
4. C. The fees associated with an account
5. D. That another professional at the firm has been sued for securities fraud, even though that professional won’t be handling the client’s account
6. 2. Which of the following would require disclosure to a client?
7. I. That research was prepared by a third party
8. II. That a security is a new offering
9. III. That a professional previously worked for a company that issues securities
10. IV. That a professional has previously filed for bankruptcy.
11. A. I and II
12. B. II and III
13. C. I, II, and III
14. D. I, II, III, and IV
15. 3. When should a preliminary prospectus be delivered to a client?
16. A. By the time of purchase confirmation
17. B. At least 48 hours prior to sale confirmation
18. C. Within 48 hours of sale confirmation
19. D. Within 10 business days of trade settlement
20. 4. Which of the following would be considered inappropriate for professionals to state about their registration?
21. A. That they’ve passed the Series 63
22. B. That they are registered to sell securities in their state
23. C. That they have never had a complaint filed against their registration
24. D. That their practice is approved by their state’s securities administrator
25. 5. Which of the following statements is true of performance guarantees?
26. A. They cannot be offered to customers
27. B. They can be offered only to customers who purchase U.S. Treasury securities
28. C. They can be offered only if a client signs a waiver of their rights
29. D. They’re permitted as long as a professional publishes a list of all his or her recommendations for the previous 12 months