Slay the Series 65 Test UPDATED ACTUAL
Exam Questions and CORRECT Answers
3 Pronged Approach - CORRECT ANSWER - Test used by SEC to determine if an entity
meets the definition of an investment adviser. Does the Person provide investment advice-
relating to securities and based on the clients situation? Does the person receive compensation as
a result of providing investment advice? Is the person in the business of providing investment
advice?
8-K - CORRECT ANSWER - SEC report required by the Securities Exchange Act of 1934
of public companies announcing unusual material events. A report of unscheduled material
events or corporate changes at a company that could be of importance to the shareholders or the
Securities and Exchange Commission. Examples of events reported on an 8-K include
acquisition, bankruptcy, resignation of directors, loss of major customers or a change in the fiscal
year. Also known as Form 8k.
10-K - CORRECT ANSWER - SEC report required by the Securities Exchange act of
1934 annually of public companies.
10-Q - CORRECT ANSWER - SEC report required by the Securities Exchange act of
1934 quarterly of public companies.
12b-1 - CORRECT ANSWER - Fee deducted from a mutual fun's assets to cover
distribution costs e.g. selling, mailing, printing, advertising. An operating expense, unlike the
sale charge that is deducted from the investor's check.
72-t - CORRECT ANSWER - An Internal Revenue Service (IRS) rule that allows for
penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA
owner to take penalty-free early withdrawals, he or she must take at least five "substantially
equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy
calculated with various IRS-approved methods. Allows you to take advantage of your retirement
savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The
withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of
Rule 72(t) is that you may deplete your retirement accounts well before the end of your life
expectancy. By taking out your funds early you are putting yourself in jeopardy in the future
,75-5-10 Rule - CORRECT ANSWER - Diversification formula for a fund advertising
itself as diversified. 75% of the portfolio must have no more than 5% of assets invested in any
one security and no more than 10% of the company's outstanding shares may be owned.
200-Day Moving Average - CORRECT ANSWER - Average closing price over the
previous 200 days for a stock or an index.
401(k) Plan - CORRECT ANSWER - Qualified defined contribution plan offering
employer-matched contributions.
403(b) - CORRECT ANSWER - Qualified plan for tax-exempt, non-profit organizations
404(c) - CORRECT ANSWER - Safe-harbor provisions allowing employers to pass off
risk to participants of defined contribution plans.
457 Plan - CORRECT ANSWER - Tax-advantaged retirement accounts for state and
municipal government employees. AKA Section 457 Plan
529 Plans - CORRECT ANSWER - Education savings plans offering tax-free distributions
at the federal level for qualified education expenses.
1035 Contract Excange - CORRECT ANSWER - Section 1035 Exchange refers to the
replacement of an annuity or life insurance policy for a new one without incurring any tax
consequence for the exchange. The IRS allows holders of these types of contracts to do this in
order to replace outdated contracts with new contracts with improved benefits, lower fees and
different investment options. The following exchanges of insurance contracts are considered tax-
free by the IRS: replacing one annuity contract for another annuity contract with identical
annuitant replacing one life insurance policy for another life insurance policy, endowment policy
or annuity contract replacing one endowment policy for an identical endowment policy or an
annuity contract Any other variation from those acceptable exchanges listed above (annuity
contract for life insurance) will not be considered a tax-free exchange. The IRS has provided
strict guidelines that the owner, insured and annuitant must be the same on the new contract as
listed on the old in order to qualify for the tax-free treatment. The contract must also exchange
,directly between the insurance companies to retain the tax-free status. The IRS has ruled in
several previous cases that if an owner cashes out of a current contract and immediately applies
the proceeds to a new contract it will not be treated as a tax-free event or Section 1035
Exchange.
1040 - CORRECT ANSWER - Tax form used by individuals and sole proprietors.
1041 - CORRECT ANSWER - Tax form used by trusts and estates
1065 - CORRECT ANSWER - Tax for used by partnerships
1099-DIV - CORRECT ANSWER - Tax form sent to investors showing dividends and
capital gains distributions from a mutual fund for the tax year.
1099-OID - CORRECT ANSWER - Tax form used to pay annual accretion on a zero
coupon or any taxable original issue discount (OID) bond
1120 - CORRECT ANSWER - Tax form used by corporations
A-Shares - CORRECT ANSWER - Mutual fun shares sold with a front-end sales
load/charge. Lower annual expenses than B and C shares.
Account at Maintenance - CORRECT ANSWER - The point at which a customers equity
in a margin account is just high enough to avoid a margin call
Account Freeze - CORRECT ANSWER - Temporary restrictions placed on a customers
account for violations of Regulation T.
Accounts Payable - CORRECT ANSWER - What a company owes its vendors in the
short-term a current liability
, Accounts receivable - CORRECT ANSWER - What a customer owe a company in the
short-term a current asset.
Account Statement - CORRECT ANSWER - Document sent to a broker-dealer customer
showing the recent value of all cash and securities, plus all recent activity in the account.
Accredited Investors - CORRECT ANSWER - Large institutional investors, and
individuals meeting certain income or net worth requirements allowing them to participate in for
example a private placement under Reg D of the Securities Act of 1933 or hedge funds.
Accretion - CORRECT ANSWER - Increasing the cost basis of a discount bond for tax
purposes.
Accrued Interest - CORRECT ANSWER - The interest that a buyer of a debt security
owes the seller. Bond interest is payable only twice a year, and the buyer will receive the next
full interest payment. Therefore the buyer owes the seller for every day of interest since the last
payment up to the day before the transaction settles.
Accrued Taxes - CORRECT ANSWER - Taxes that are owed by a company over the
short-term a current liability
Accrued Wages - CORRECT ANSWER - Wages that are owed by the company over the
short-term a current liability
Accumulation Stage/ Period - CORRECT ANSWER - Period during which contributions
are made to an annuity during which the investor holds accumulation units.
Accumulation Units - CORRECT ANSWER - What the purchaser of an annuity receives
in exchange for his purchase payments during the accumulation phase and accounting measure
representing a proportional share of the separate account.
Exam Questions and CORRECT Answers
3 Pronged Approach - CORRECT ANSWER - Test used by SEC to determine if an entity
meets the definition of an investment adviser. Does the Person provide investment advice-
relating to securities and based on the clients situation? Does the person receive compensation as
a result of providing investment advice? Is the person in the business of providing investment
advice?
8-K - CORRECT ANSWER - SEC report required by the Securities Exchange Act of 1934
of public companies announcing unusual material events. A report of unscheduled material
events or corporate changes at a company that could be of importance to the shareholders or the
Securities and Exchange Commission. Examples of events reported on an 8-K include
acquisition, bankruptcy, resignation of directors, loss of major customers or a change in the fiscal
year. Also known as Form 8k.
10-K - CORRECT ANSWER - SEC report required by the Securities Exchange act of
1934 annually of public companies.
10-Q - CORRECT ANSWER - SEC report required by the Securities Exchange act of
1934 quarterly of public companies.
12b-1 - CORRECT ANSWER - Fee deducted from a mutual fun's assets to cover
distribution costs e.g. selling, mailing, printing, advertising. An operating expense, unlike the
sale charge that is deducted from the investor's check.
72-t - CORRECT ANSWER - An Internal Revenue Service (IRS) rule that allows for
penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA
owner to take penalty-free early withdrawals, he or she must take at least five "substantially
equal periodic payments" (SEPPs). The amount depends on the IRA owner's life expectancy
calculated with various IRS-approved methods. Allows you to take advantage of your retirement
savings before the age of 59.5, when there is otherwise a 10% penalty on early withdrawal. The
withdrawals, however, are still taxed at your income rate. The drawback to taking advantage of
Rule 72(t) is that you may deplete your retirement accounts well before the end of your life
expectancy. By taking out your funds early you are putting yourself in jeopardy in the future
,75-5-10 Rule - CORRECT ANSWER - Diversification formula for a fund advertising
itself as diversified. 75% of the portfolio must have no more than 5% of assets invested in any
one security and no more than 10% of the company's outstanding shares may be owned.
200-Day Moving Average - CORRECT ANSWER - Average closing price over the
previous 200 days for a stock or an index.
401(k) Plan - CORRECT ANSWER - Qualified defined contribution plan offering
employer-matched contributions.
403(b) - CORRECT ANSWER - Qualified plan for tax-exempt, non-profit organizations
404(c) - CORRECT ANSWER - Safe-harbor provisions allowing employers to pass off
risk to participants of defined contribution plans.
457 Plan - CORRECT ANSWER - Tax-advantaged retirement accounts for state and
municipal government employees. AKA Section 457 Plan
529 Plans - CORRECT ANSWER - Education savings plans offering tax-free distributions
at the federal level for qualified education expenses.
1035 Contract Excange - CORRECT ANSWER - Section 1035 Exchange refers to the
replacement of an annuity or life insurance policy for a new one without incurring any tax
consequence for the exchange. The IRS allows holders of these types of contracts to do this in
order to replace outdated contracts with new contracts with improved benefits, lower fees and
different investment options. The following exchanges of insurance contracts are considered tax-
free by the IRS: replacing one annuity contract for another annuity contract with identical
annuitant replacing one life insurance policy for another life insurance policy, endowment policy
or annuity contract replacing one endowment policy for an identical endowment policy or an
annuity contract Any other variation from those acceptable exchanges listed above (annuity
contract for life insurance) will not be considered a tax-free exchange. The IRS has provided
strict guidelines that the owner, insured and annuitant must be the same on the new contract as
listed on the old in order to qualify for the tax-free treatment. The contract must also exchange
,directly between the insurance companies to retain the tax-free status. The IRS has ruled in
several previous cases that if an owner cashes out of a current contract and immediately applies
the proceeds to a new contract it will not be treated as a tax-free event or Section 1035
Exchange.
1040 - CORRECT ANSWER - Tax form used by individuals and sole proprietors.
1041 - CORRECT ANSWER - Tax form used by trusts and estates
1065 - CORRECT ANSWER - Tax for used by partnerships
1099-DIV - CORRECT ANSWER - Tax form sent to investors showing dividends and
capital gains distributions from a mutual fund for the tax year.
1099-OID - CORRECT ANSWER - Tax form used to pay annual accretion on a zero
coupon or any taxable original issue discount (OID) bond
1120 - CORRECT ANSWER - Tax form used by corporations
A-Shares - CORRECT ANSWER - Mutual fun shares sold with a front-end sales
load/charge. Lower annual expenses than B and C shares.
Account at Maintenance - CORRECT ANSWER - The point at which a customers equity
in a margin account is just high enough to avoid a margin call
Account Freeze - CORRECT ANSWER - Temporary restrictions placed on a customers
account for violations of Regulation T.
Accounts Payable - CORRECT ANSWER - What a company owes its vendors in the
short-term a current liability
, Accounts receivable - CORRECT ANSWER - What a customer owe a company in the
short-term a current asset.
Account Statement - CORRECT ANSWER - Document sent to a broker-dealer customer
showing the recent value of all cash and securities, plus all recent activity in the account.
Accredited Investors - CORRECT ANSWER - Large institutional investors, and
individuals meeting certain income or net worth requirements allowing them to participate in for
example a private placement under Reg D of the Securities Act of 1933 or hedge funds.
Accretion - CORRECT ANSWER - Increasing the cost basis of a discount bond for tax
purposes.
Accrued Interest - CORRECT ANSWER - The interest that a buyer of a debt security
owes the seller. Bond interest is payable only twice a year, and the buyer will receive the next
full interest payment. Therefore the buyer owes the seller for every day of interest since the last
payment up to the day before the transaction settles.
Accrued Taxes - CORRECT ANSWER - Taxes that are owed by a company over the
short-term a current liability
Accrued Wages - CORRECT ANSWER - Wages that are owed by the company over the
short-term a current liability
Accumulation Stage/ Period - CORRECT ANSWER - Period during which contributions
are made to an annuity during which the investor holds accumulation units.
Accumulation Units - CORRECT ANSWER - What the purchaser of an annuity receives
in exchange for his purchase payments during the accumulation phase and accounting measure
representing a proportional share of the separate account.
