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Investment Companies and Variable Products Flashcards

7 cards from real FINRA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Investment Companies and Variable Products flashcards as text

  1. What is the maximum sales charge (load) permitted on mutual fund shares under FINRA rules?

    Answer: 8.5%

    FINRA Rule 2341 limits the maximum sales charge on mutual fund shares to 8.5% of the public offering price.

  2. Under the Investment Company Act of 1940, what minimum percentage of a registered open-end investment company's board must consist of non-interested (independent) directors?

    Answer: 40%

    The Investment Company Act of 1940 requires at least 40% of a registered investment company's board to be composed of independent (non-interested) directors.

  3. A variable annuity's separate account is best characterized as:

    Answer: A portfolio of securities whose value fluctuates with investment performance

    The separate account holds the underlying investment subaccounts, and its value fluctuates daily based on the performance of those chosen investments.

  4. Which mutual fund share class typically has no front-end sales load but imposes a contingent deferred sales charge (CDSC) upon redemption?

    Answer: Class B shares

    Class B shares carry no upfront sales charge but impose a CDSC that declines over time; they often convert to Class A shares after a set holding period.

  5. What is the primary structural difference between an open-end and a closed-end investment company?

    Answer: Open-end funds continuously issue and redeem shares at NAV; closed-end funds have a fixed share count traded on exchanges

    Open-end funds (mutual funds) continuously offer new shares and redeem them at NAV, while closed-end funds issue a fixed number of shares that trade on exchanges at market prices.

  6. Under FINRA rules, a mutual fund breakpoint discount may be achieved by which of the following?

    Answer: Signing a letter of intent to invest a specified amount within 13 months

    A letter of intent (LOI) allows an investor to qualify for a breakpoint discount by committing to invest a target dollar amount over a 13-month period.

  7. Which of the following is NOT typically a characteristic of a money market mutual fund?

    Answer: Provides SIPC protection guaranteeing the $1.00 NAV

    Money market funds are not bank deposits; SIPC protects against broker-dealer insolvency but does not guarantee the $1.00 NAV—money market funds can 'break the buck.'

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  1. finra.org — Renewal, score validity, test dates, test delivery, eligibility, fees, exam format, passing score, score release, time limit · verified Oct 2026