Chapter 4 Practice Questions
1. Member firms that wish to recommend deferred variable annuities must make sure that the customer would benefit from certain features of these investments. The benefits include all of the following except:
A. Tax-deferred growth
B. Death or living benefit
C. Annuitization
D. Immediate redemption without tax penalties
2. Under suitability rules, which of the following trades could a registered representative make without first attempting to obtain a customer’s suitability information?
A. A new walk-in customer asks to purchase a fund that you recommend which has seen large gains for the past year
B. An employee of an institutional investor asks to purchase, for her personal account, a fund that you recommend
C. A trade you wish to execute, based on his past suitability information, for a former customer who has recently returned to work with you after a three-year layoff
D. A proposed purchase made by a customer whose decision to buy is based solely on his own research
3. Which of the following would least likely be permitted as a non-cash compensation arrangement?
A. Season tickets to a sporting event
B. Dinner at a local steakhouse
C. Reimbursement for a meeting held by an offeror to educate associated persons
D. A ticket to Wicked, a Broadway show, on premiere night
4. Which of the following would be acceptable to give to a customer under the FINRA rules on gifts and gratuities?
A. A $200 ticket to Cirque du Soleil in which you accompany the person to the show
B. Two $75 dollar tickets to a concert that you will not attend
C. A $125 holiday box of chocolates sent by a representative
D. A $150 stroller gift that the firm pays for
5. What penalties may FINRA impose for a minor rules violation after an MRVP letter has been approved by the NAC?
A. Up to a $2,500 fine
B. Suspension and/or up to a $2,500 fine
C. Suspension, expulsion, and/or up