SIE: Exercise

Exercise

Choose the best answer

1. 1. Members of the board of directors:
2. I. Can include employees of the custodian firm
3. II. Must include at least 40% non-interested persons
4. III. Assist with day-to-day portfolio management
5. IV. Vote on a change of investment adviser
6. A. II and IV
7. B. I and III
8. C. II and III
9. D. I and II
10. 2. Which of the following statements about the sale of mutual fund shares is not true?
11. A. The underwriter prepares sales literature.
12. B. The mutual fund company sells shares to the transfer agent at the NAV.
13. C. The transfer agent receives the investors’ payments and issues new shares to buyers.
14. D. The custodian safeguards the proceeds of the sale.
15. 3. Which of the following is not true of the role of mutual fund shareholders?
16. A. They vote to select board members.
17. B. They vote on changes in fees.
18. C. They vote to decide what percentage of the profits should be retained.
19. D. They vote to approve an independent auditor.
20. 4. Which of the following entities identifies the tax status of distributions made to shareholders?
21. A. Investment adviser
22. B. Transfer agent
23. C. Custodian
24. D. Underwriter
25. 5. Which of the following is true of mutual funds?
26. A. When shareholders redeem shares, the transfer agent resells those shares to new buyers.
27. B. Dealers purchase shares from the sponsor at NAV and charge a fee when they resell the shares.
28. C. Underwriters typically hold an inventory of mutual fund shares from which they sell to investors.
29. D. The transfer agent distributes income and sends out shareholder reports.

Answers

1. 1. D. The board of directors can include persons other than non-interested persons, but at least 40% must be non-interested. Shareholders vote on a