FINRA Investment Companies and Variable Products

Question 1

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

Accepted Answer

8.5%

Answer

6.25%

Answer

5.0%

Answer

10.0%

Question 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?

Accepted Answer

40%

Answer

25%

Answer

51%

Answer

75%

Question 3

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

Accepted Answer

A portfolio of securities whose value fluctuates with investment performance

Answer

A fixed account with returns guaranteed by the insurance company

Answer

A money market account guaranteeing principal preservation

Answer

An FDIC-insured savings vehicle held by the insurer

Question 4

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

Accepted Answer

Class B shares

Answer

Class A shares

Answer

Class C shares

Answer

Institutional shares

Question 5

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

Accepted Answer

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

Answer

Open-end funds invest only in equities; closed-end funds invest only in bonds

Answer

Open-end funds always have lower expense ratios than closed-end funds

Answer

Closed-end funds are not registered under the Investment Company Act of 1940

Question 6

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

Accepted Answer

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

Answer

Combining purchases made in different, unrelated fund families

Answer

Purchasing shares simultaneously through multiple broker-dealers

Answer

Combining purchases made by unrelated individuals in the same zip code

Question 7

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

Accepted Answer

Provides SIPC protection guaranteeing the $1.00 NAV

Answer

Seeks to maintain a stable $1.00 per share NAV

Answer

Invests in short-term, high-quality debt instruments

Answer

May offer check-writing privileges to shareholders