FINRA Investment Companies and Variable Products 1

Question 1

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

Accepted Answer

8.5%

Answer

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

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

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.

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

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

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 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.

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 (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.

(FINRA) FINRA Exams Practice Test

(FINRA) FINRA Exams Practice Test

FINRA Investment Companies and Variable Products 1