Series 65 Mastery Exam
ABC Securities, Inc. is a broker-dealer providing services to a number of investment advisers in exchange
for directed brokerage business. If any of those investment advisers are offered the opportunity to
attend several cybersecurity fora held in various parts of the United States, under Section 28(e) of the
Securities Exchange Act of 1934, it would
A. be permitted as long as the only payment made by the broker-dealer was travel and transportation
costs
B. be permitted as long as the only payment made by the broker-dealer was the registration costs
C. be permitted only if the investment adviser paid all of the costs of attendance
D. not be permitted unless the broker-dealer was also registered as an investment adviser - correct
answer ✔✔B
The safe harbor provisions of Section 28(e) permit the payment of registration fees for seminars, but not
any other associated costs.
A corporation with a 10%, $100 par cumulative preferred paid $5 to preferred stockholders last year. This
year the company wants to pay common dividends. How much must it pay each preferred share
outstanding before paying common shareholders?
A. $5
B. $15
C. $0
D. $10 - correct answer ✔✔B
A 10% cumulative preferred stock with a $100 par value would pay an annual dividend of $10 ($100 ×
10%). Cumulative preferred requires all dividends that have previously been skipped be paid before any
dividends paid to common stock. The $5 that was paid last year left $5 in dividends in arrears. Therefore,
this year requires that a $15 dividend be paid to the preferred shareholders before any common
dividend paid to common shareholders.
,One of your customers has a substantial savings account at the local S&L. The customer has several
grandchildren and wants the flexibility of being able to change the beneficiary allocations as their
financial conditions change. You should recommend that the customer investigate the use of
A. an UTMA account.
B. a Totten trust.
C. a durable power of attorney.
D. an irrevocable trust. - correct answer ✔✔B.
A Totten trust allows for the transfer of ownership of a bank account to a beneficiary or beneficiaries
after the owner's death. It is the predecessor of today's POD (pay on death) and TOD (transfer on death)
accounts.
Averaging techniques would include all of the following EXCEPT
A. maintaining a DRIP with a stock listed on the NYSE
B. dollar cost averaging
C. reinvesting all distributions from an open-end investment management company
D. maintaining a constant ratio plan - correct answer ✔✔D
Averaging techniques involve some form of regular investing; a constant ratio plan involves buying and
selling different asset classes to keep the ratio between them at a static percentage.
Which of the following quantitative measurements would probably be the most important to an investor
in high-quality fixed income investments?
A. Expected return
B. After-tax return
C. Annualized return
D. Inflation-adjusted return - correct answer ✔✔D
One of the risks that an investor in fixed income securities (regardless of rating) incurs is the loss of
purchasing power. To create a measure of a fixed income investor's return, you should take into account
the impact of inflation through the calculation of inflation-adjusted return.
,Which of the following statements is NOT true of Regulation S-P?
A)
Customers may be provided privacy information on internet web pages.
B)
Consumers must be given an initial privacy notice.
C)
Customers must be given annual privacy disclosures on a separate piece of paper.
D)
Consumers need not be given an annual privacy notice. - correct answer ✔✔C
A customer with an ongoing relationship with a member must receive both an initial and an annual
privacy notice. It may be included in other documents but must be clear and conspicuous. Consumers
have a one-off relationship, so there is no requirement to provide them or former customers with annual
disclosures.
A popular strategy for income investors who wish to take advantage of potentially higher interest rates
when reinvesting maturing securities is
A)
rebalancing
B)
barbelling
C)
laddering
D)
bulleting - correct answer ✔✔C
Laddering involves investing a sum at one time, but with different maturities. As each bond (or CD)
matures, it is reinvested at current rates and then becomes the longest maturity in the portfolio.
Which of the following business structures is most appropriate for retaining money in the business?
, A)
An LLC
B)
An S corporation
C)
A C corporation
D)
A sole proprietorship - correct answer ✔✔C
Only in the case of a C corporation is money retained not subject to tax on the personal level. In all of the
other choices, any income is passed through to the owners making it inefficient to accumulate funds in
the business.
If a customer enters a market order to buy 100 shares of GFT, the trade will be executed at the
A)
lowest offer
B)
lowest bid
C)
highest bid
D)
highest ask - correct answer ✔✔A
A market order mandates that a trade must be executed at the best execution (price) that can be
attained for the client. This question is meant to find out your knowledge of the difference between a
bid and an offer and what an inside market is. The inside bid is the highest price a dealer is willing to pay
to someone who wants to sell this stock. The inside offer, usually referred to as the ask, is the lowest
price made available by a dealer to those wishing to buy this stock.
Isabelle Burns is an investment adviser representative with Constructive Allocation Programs (CAP), a
firm whose client base is composed of high net worth individuals. In her personal portfolio, Burns has an
investment in Torex, a company that has developed software to speed up internet browsing. Burns has
thoroughly researched Torex and believes the company is financially strong although currently,
significantly undervalued. Under the NASAA Model Rule on Unethical Business Practices of Investment
Advisers, Investment Adviser Representatives, and Federal Covered Advisers, Burns may
ABC Securities, Inc. is a broker-dealer providing services to a number of investment advisers in exchange
for directed brokerage business. If any of those investment advisers are offered the opportunity to
attend several cybersecurity fora held in various parts of the United States, under Section 28(e) of the
Securities Exchange Act of 1934, it would
A. be permitted as long as the only payment made by the broker-dealer was travel and transportation
costs
B. be permitted as long as the only payment made by the broker-dealer was the registration costs
C. be permitted only if the investment adviser paid all of the costs of attendance
D. not be permitted unless the broker-dealer was also registered as an investment adviser - correct
answer ✔✔B
The safe harbor provisions of Section 28(e) permit the payment of registration fees for seminars, but not
any other associated costs.
A corporation with a 10%, $100 par cumulative preferred paid $5 to preferred stockholders last year. This
year the company wants to pay common dividends. How much must it pay each preferred share
outstanding before paying common shareholders?
A. $5
B. $15
C. $0
D. $10 - correct answer ✔✔B
A 10% cumulative preferred stock with a $100 par value would pay an annual dividend of $10 ($100 ×
10%). Cumulative preferred requires all dividends that have previously been skipped be paid before any
dividends paid to common stock. The $5 that was paid last year left $5 in dividends in arrears. Therefore,
this year requires that a $15 dividend be paid to the preferred shareholders before any common
dividend paid to common shareholders.
,One of your customers has a substantial savings account at the local S&L. The customer has several
grandchildren and wants the flexibility of being able to change the beneficiary allocations as their
financial conditions change. You should recommend that the customer investigate the use of
A. an UTMA account.
B. a Totten trust.
C. a durable power of attorney.
D. an irrevocable trust. - correct answer ✔✔B.
A Totten trust allows for the transfer of ownership of a bank account to a beneficiary or beneficiaries
after the owner's death. It is the predecessor of today's POD (pay on death) and TOD (transfer on death)
accounts.
Averaging techniques would include all of the following EXCEPT
A. maintaining a DRIP with a stock listed on the NYSE
B. dollar cost averaging
C. reinvesting all distributions from an open-end investment management company
D. maintaining a constant ratio plan - correct answer ✔✔D
Averaging techniques involve some form of regular investing; a constant ratio plan involves buying and
selling different asset classes to keep the ratio between them at a static percentage.
Which of the following quantitative measurements would probably be the most important to an investor
in high-quality fixed income investments?
A. Expected return
B. After-tax return
C. Annualized return
D. Inflation-adjusted return - correct answer ✔✔D
One of the risks that an investor in fixed income securities (regardless of rating) incurs is the loss of
purchasing power. To create a measure of a fixed income investor's return, you should take into account
the impact of inflation through the calculation of inflation-adjusted return.
,Which of the following statements is NOT true of Regulation S-P?
A)
Customers may be provided privacy information on internet web pages.
B)
Consumers must be given an initial privacy notice.
C)
Customers must be given annual privacy disclosures on a separate piece of paper.
D)
Consumers need not be given an annual privacy notice. - correct answer ✔✔C
A customer with an ongoing relationship with a member must receive both an initial and an annual
privacy notice. It may be included in other documents but must be clear and conspicuous. Consumers
have a one-off relationship, so there is no requirement to provide them or former customers with annual
disclosures.
A popular strategy for income investors who wish to take advantage of potentially higher interest rates
when reinvesting maturing securities is
A)
rebalancing
B)
barbelling
C)
laddering
D)
bulleting - correct answer ✔✔C
Laddering involves investing a sum at one time, but with different maturities. As each bond (or CD)
matures, it is reinvested at current rates and then becomes the longest maturity in the portfolio.
Which of the following business structures is most appropriate for retaining money in the business?
, A)
An LLC
B)
An S corporation
C)
A C corporation
D)
A sole proprietorship - correct answer ✔✔C
Only in the case of a C corporation is money retained not subject to tax on the personal level. In all of the
other choices, any income is passed through to the owners making it inefficient to accumulate funds in
the business.
If a customer enters a market order to buy 100 shares of GFT, the trade will be executed at the
A)
lowest offer
B)
lowest bid
C)
highest bid
D)
highest ask - correct answer ✔✔A
A market order mandates that a trade must be executed at the best execution (price) that can be
attained for the client. This question is meant to find out your knowledge of the difference between a
bid and an offer and what an inside market is. The inside bid is the highest price a dealer is willing to pay
to someone who wants to sell this stock. The inside offer, usually referred to as the ask, is the lowest
price made available by a dealer to those wishing to buy this stock.
Isabelle Burns is an investment adviser representative with Constructive Allocation Programs (CAP), a
firm whose client base is composed of high net worth individuals. In her personal portfolio, Burns has an
investment in Torex, a company that has developed software to speed up internet browsing. Burns has
thoroughly researched Torex and believes the company is financially strong although currently,
significantly undervalued. Under the NASAA Model Rule on Unethical Business Practices of Investment
Advisers, Investment Adviser Representatives, and Federal Covered Advisers, Burns may
