Finra Series-6 Exam Practice Test Instant Access

Question 1

Joan is a customer of GetErDone Broker-Dealers. Her twin sister, Jean, has accompanied her to GetErDone's office and has gathered some information regarding opening an account with the firm, giving it her contact information at the same time.

Under Regulation S-P, which of the following statements regarding GetErDone's handling of Joan's and Jean's personal information is true?

AGetErDone must provide Joan with a notification of its privacy policies annually and provide her with information on how to mandate that it not share her nonpublic personal information with nonaffiliated third parties.

BGetErDone can disclose any information that Jean provided them to nonaffiliated third parties since Jean is not a customer of the broker-dealer.

CGetErDone is required to have provided Jean with a copy of its privacy policy when she inquired about opening an account with the broker-dealer.

DAll of the above are true statements.

Answer : A

Since Joan is a customer of GetErDone, GetErDone must provide her with a notification of its privacy policies annually and provide her with information on how to mandate that it not share her nonpublic personal information with nonaffiliated third parties. GetErDone may not disclose any information about Jean, who is not yet a customer of the firm, unless the broker -dealer has provided Jean with its privacy policy and given her the opportunity to opt out of its ability to share her information with nonaffiliated third parties. GetErDone is not required to have provided Jean with a copy of its privacy policy when she inquired about opening an account, but it will need to provide her with one when/if she becomes a customer.

Question 2

Your client bought a variable annuity contract that has a 5% contingent deferred sales charge with a 7-year surrender period four years ago. He has been reading about bonus annuities and 1035 exchanges and has asked for your advice. You can tell him:

Athat it's a great idea, and you plan on how you're going to spend the unexpected income.

Bthat although the exchange doesn't have any tax consequences, he'll be looking at a new, longer, surrender period.

Cthat he'll have to pay the 5% deferred sales charge if he executes the exchange.

Dboth B and C.

Answer : D

If your client bought a variable annuity contract with a 7-year surrender period four years ago, you can tell him that even though there will be no tax consequences associated with the exchange, he'll have to pay the 5% deferred sales charge if he executes the exchange, and he'll be looking at a new, longer, surrender period-one of the less desirable features associated with bonus annuities.

Question 3

Which of the following is not a cost associated with an investment in a variable annuity contract?

Amortality and expense risk fee

Binvestment management fee

Cstate premium tax

DAll of the above are costs associated with an investment in a variable annuity contract.

Answer : D

All of the choices are costs associated with an investment in a variable annuity contract. Nor is this an exhaustive list of the costs.

Question 4

The mortality guarantee of a variable annuity contract:

Aguarantees a fixed death benefit amount will pay to your beneficiaries upon your death.

Bguarantees that you can receive a monthly check of a specified amount as long as you live.

Cguarantees that both you and a person you specify as your beneficiary will continue to receive payments as long as one of the two of you is alive.

DNone of the above is a true statement about the mortality guarantee of a variable annuity contract.

Answer : D

None of the choices provided is a true statement about the mortality guarantee of a variable annuity contract. The mortality guarantee guarantees that you can receive a monthly check for as long as you live, but it does not guarantee that the check will be for a specified amount.

Question 5

Which of the following statements regarding the separate account of an insurance company is true?

AThe monies in the separate account are used to make payments to all the policyholders of the company when a payment is triggered.

BThe separate account contains the monies from which the company pays its operating expenses, e.g., salaries, etc.

CFunds from the separate account are used to make payments to fixed annuity investors.

DThe separate account must register as an investment company under the Investment Company Act of 1940.

Answer : D

The true statement is that the separate account must register as an investment company under the Investment Company Act of 1940. The premiums paid by investors for variable life insurance (less numerous charges) are invested in subaccounts within the separate account, and the earnings of the subaccounts are used, in turn, to make payments to the owners of variable life insurance policies, but not to any of the other policyholders of the company, such as the fixed annuity investors. The insurance company pays its operating expenses out of its general account.

Question 6

When a mutual fund is valuing your pre-existing holdings to see if you qualify for a reduced sales charge under its rights of accumulation program, it must use:

Athe current NAV of your holdings.

Bthe current public offering price (POP) of your holdings.

Cthe price you paid when you purchased the shares originally.

Dnone of the above.

Answer : D

When a mutual fund is valuing your pre-existing holdings to see if you qualify for a reduced sales charge under its rights of accumulation program, it is not required to use any specific one of the specified choices. It is allowed to choose from among them. Some funds even allow you to use the higher of either the current NAV or POP or the historical NAV or POP, since the historical value might be higher than the current value in a down market.

Question 7

Which of the following share classes do not have front-end loads?

AClass A

BClass B

CClass C

DNeither Class B nor Class C shares have front-end loads.

Answer : D

Neither Class B nor Class C shares have front-end loads. Class B and Class C shares typically have higher 12b -1 fees, however, with Class C having the highest 12b-1 fees of the three classes.

Finra Series-6 Investment Company and Variable Contracts Products Representative Exam Practice Test