Finra Exam Series-6 Topic 4 Question 56 Discussion

Actual exam question for Finra's Series-6 exam

Question #: 56
Topic #: 4

: 202

Sarah Bean is a registered representative with NewWave Investments, a family of mutual funds. She has recommended one of NewWave's funds to a client and given him a prospectus. The prospectus provides information about the fund's breakpoints and indicates that an investment of $25,000 or more will lead to a reduced front-end load. The prospectus also clearly explains the details of a letter of intent. Sarah's client invests $23,000 in the fund then and there without even opening the prospectus.

Has Sarah violated any of FINRA's rules of conduct?

ANo. Sarah properly provided her client with a prospectus prior to selling him shares of the fund.

BYes. Sarah is required to explain the concepts of breakpoints and letters of intent to her client.

CYes. Sarah needed to tell her client that he would have to read through the prospect us to ensure he understood all aspects of the investment before she could take any money from him.

DYes. Sarah is not permitted to accept funds from a client without the presence of her immediate supervisor.

Show Suggested Answer

Suggested Answer: A

Among other things, the trade confirmation that Anna receives must stipulate the items described in Selections I and III only. The trade confirmation that Anna receives from GetErDone must stipulate the time and date of the transaction, the number of shares sold, and the price at which they were sold. The exchange or ECN on which the transaction was executed is not provided on the confirmation statement. Whether GetErDone acted as a principal or a broker in the transaction does need to be stipulated, but in this instance GetErDone acted as a broker, not a principal. GetErDone did not itself buy the shares from Anna.

by Lisha at Feb 26, 2023, 08:29 AM

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18 days ago

Hmm, I think Sarah should have explained the breakpoints and letter of intent details to her client. Even if the prospectus had the information, she has a duty to make sure the client understands it.

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