Series 6 practice questions and exam guide

A rep sends a market commentary newsletter to 40 retail prospects in one week. How is this communication classified under Rule 2210?

1. Correspondence, because it discusses market conditions rather than products
2. Institutional communication, because it discusses market-wide trends
3. Exempt communication, because newsletters are not covered by Rule 2210
4. Retail communication, because it reaches more than 25 retail investors in 30 days

Answer: D — Retail communication, because it reaches more than 25 retail investors in 30 days

D) Correct: distribution to more than 25 retail investors within 30 calendar days makes this a retail communication, regardless of topic. A) Correspondence is capped at 25 or fewer retail recipients in 30 days; this newsletter exceeds that. B) Institutional communication requires an institutional-investor audience, not retail prospects. C) Newsletters referencing the firm's services fall squarely within Rule 2210's scope.

A satisfied client agrees to appear in a firm's retail communication praising a specific fund, and the firm pays her a small honorarium. What must the ad disclose?

1. Nothing, since testimonials from real clients need no special disclosure
2. Only the client's full legal name and city of residence
3. That the client is a shareholder of record as of the ad's print date
4. That compensation was paid and that her experience may not be representative

Answer: D — That compensation was paid and that her experience may not be representative

D) Correct: paid testimonials must disclose compensation and that the experience is not necessarily representative of other clients. A) Testimonials are specifically subject to disclosure requirements. B) Name/city disclosure isn't the required substance. C) Shareholder-of-record status isn't a required testimonial disclosure.

A rep is interviewed live on a local television program about mutual fund investing basics. Which statement about this interview is MOST accurate?

1. It requires FINRA filing 10 business days before airing
2. It is treated as institutional communication because it airs publicly
3. It requires principal pre-approval because it reaches many viewers
4. It is exempt from prior approval but must still meet fair-and-balanced content standards

Answer: D — It is exempt from prior approval but must still meet fair-and-balanced content standards

D) Correct: live public appearances are exempt from prior written approval, but the fair, balanced, non-misleading content standard and post-use supervision still apply. A) Public appearances aren't subject to the retail-communication filing requirement the way pre-scripted ads are. B) Public television broadcasts are not institutional communications. C) Public appearances are specifically exempt from pre-approval even though they reach a broad audience.

A rep recommends eight separate mutual fund switches for a retiree's account over six months, each individually defensible on its own facts but collectively generating substantial sales charges. Which suitability concern is MOST directly implicated?

1. Reasonable-basis suitability
2. Quantitative suitability
3. The Customer Identification Program
4. Rule 2210 content standards

Answer: B — Quantitative suitability

B) Correct: quantitative suitability addresses whether a series of recommendations, taken together, is excessive for the customer even if each trade seems defensible alone. A) Reasonable-basis concerns product-level diligence, not trading frequency. C) CIP concerns identity verification at account opening. D) Rule 2210 governs communications content, not trading suitability.

The M&E charge in a variable annuity primarily covers:

1. Subaccount investment management fees due monthly
2. Mortality and expense risk borne by the insurer
3. Federal income taxes on the contract's earnings
4. The insurer's advertising and free-look expenses

Answer: B — Mortality and expense risk borne by the insurer

A) Subaccount management fees are a separate layer. B) Correct — M&E compensates the insurer for guarantees and expense variance. C) Taxes are paid by the owner, not through M&E. D) Marketing costs are separate line items.

Suitability under FINRA Rule 2111 requires the rep to consider:

1. Age at the time of first account opening
2. The customer's investment profile as defined by rule
3. Net worth exclusive of retirement plans
4. Employer's payroll deduction schedule and match

Answer: B — The customer's investment profile as defined by rule

A) Age alone is insufficient. B) Correct — The rule enumerates profile factors including objectives and risk tolerance. C) Net worth is one factor among many. D) Employer schedule is not a factor.

A rep tells a client that dollar-cost averaging 'guarantees you'll never lose money since you're always buying at different prices.' Is this statement accurate?

1. Yes — DCA mathematically eliminates the possibility of a net loss
2. No — DCA does not guarantee a profit or protect against loss in a declining market
3. Yes — but only for money market fund purchases
4. No — DCA only works in retirement accounts, not taxable accounts

Answer: B — No — DCA does not guarantee a profit or protect against loss in a declining market

B) Correct: DCA can lower average cost per share over time but does not guarantee a profit or eliminate the risk of loss, especially in a sustained decline. A) This significantly overstates DCA's protective effect. C) DCA's characteristics aren't limited to money market funds. D) DCA works the same mechanically regardless of account type.

What is the purpose of a registered principal's review and approval of a new account form before the first trade?

1. To confirm the account information supports a reasonable basis for future suitable recommendations
2. To verify the customer's handwriting matches their driver's license
3. To calculate the customer's expected lifetime account value
4. To set the customer's initial mutual fund allocation automatically

Answer: A — To confirm the account information supports a reasonable basis for future suitable recommendations

A) Correct: principal review of the NAF confirms sufficient customer information is on file to support suitable future recommendations. B) Handwriting verification isn't the substantive purpose of principal review. C) Principals don't calculate a projected lifetime value as part of NAF approval. D) NAF approval doesn't set fund allocations.

Which statement about a UTMA custodial account is MOST accurate?

1. The custodian retains ownership of the assets even after the minor reaches majority
2. UTMA accounts may hold only cash, never securities
3. Assets become the property of the minor upon reaching the state's specified age of majority
4. A UTMA account requires two custodians at all times

Answer: C — Assets become the property of the minor upon reaching the state's specified age of majority

C) Correct: UTMA assets legally belong to the minor from the start, but the custodian controls them until the minor reaches the state-specified age of majority. A) Custodianship ends at majority; the custodian never retains ownership. B) UTMA allows a broad range of asset types, not cash only. D) A single custodian is standard.

A firm's rep is about to make her first specific investment recommendation to a brand-new retail customer. At what point must Form CRS be delivered?

1. Before or at the time of the first recommendation
2. Only if the customer requests it in writing
3. Within 30 days after the account is funded
4. At the end of the first calendar year of the relationship

Answer: A — Before or at the time of the first recommendation

A) Correct: Form CRS must be delivered before or at the time a firm first recommends an account type, transaction, or strategy. B) Delivery isn't contingent on a customer request. C) 30 days after funding is too late relative to the recommendation trigger. D) Year-end delivery would occur long after the recommendation, violating the timing requirement.

An employee separating from her job wants to move her 401(k) balance to an IRA while avoiding mandatory federal withholding on the distribution. What method should she use?

1. A direct (trustee-to-trustee) rollover
2. An indirect rollover with the check made payable to her personally
3. A hardship withdrawal followed by a new contribution
4. A 401(k) loan converted into an IRA contribution

Answer: A — A direct (trustee-to-trustee) rollover

A) Correct: a direct trustee-to-trustee rollover avoids the mandatory 20% federal withholding that applies when a check is issued to the participant. B) An indirect rollover with the check paid to her personally triggers the mandatory 20% withholding, even if she redeposits the full amount later. C) Hardship withdrawals are taxable events with penalties, not a withholding-avoidance rollover method. D) Loans and rollovers are distinct mechanisms; a loan cannot simply be 'converted' into an IRA contribution.

A firm receives a written customer complaint alleging theft of funds by a registered rep. Under FINRA Rule 4530, what is the firm's obligation?

1. Report the matter to FINRA within the rule's specified reporting timeframe
2. No reporting is required unless the customer files a formal arbitration claim
3. The firm may wait until the rep's next Form U4 amendment cycle to report
4. Reporting is only required if the complaint exceeds $500,000 in alleged damages

Answer: A — Report the matter to FINRA within the rule's specified reporting timeframe

A) Correct: Rule 4530 requires firms to report specified events, including certain serious customer complaints, to FINRA within the rule's timeframe. B) Reporting isn't contingent on the customer separately filing arbitration. C) Waiting for an unrelated U4 amendment cycle would violate the rule's timeframe. D) There's no $500,000 damages threshold gating this type of report.

Variable life differs from term life primarily because it:

1. Has cash value invested in separate-account subaccounts
2. Pays no death benefit to the named beneficiary
3. Requires no premium payments after policy issue
4. Provides coverage only for a fixed short term

Answer: A — Has cash value invested in separate-account subaccounts

A) Correct — Variable life is permanent insurance with a subaccount cash value. B) Variable life does pay a death benefit. C) Premiums are required (flexible in VUL). D) Term life has fixed short duration.

Front-running a customer order is:

1. Executing the customer's order promptly at market
2. Buying the customer a business meal or coffee
3. Setting a price alert for the customer's target
4. Trading for the rep's account ahead of that order

Answer: D — Trading for the rep's account ahead of that order

A) Prompt execution is required, not prohibited. B) Ordinary hospitality is not front-running. C) Alerts are unrelated to trading ahead. D) Correct — Front-running is a prohibited abuse of order information.

Which document must be delivered at or before a mutual fund purchase?

1. The fund's next scheduled proxy statement mailing
2. The current prospectus or summary prospectus for the fund
3. The custodian bank's audited financial statements
4. A signed personal letter from the fund manager

Answer: B — The current prospectus or summary prospectus for the fund

A) Proxy statements are for shareholder votes, not sales. B) Correct — Prospectus delivery is required at or before purchase. C) Custodian financials are not required. D) Personal letters are not the disclosure document.

A trusted contact person under FINRA Rule 4512:

1. Receives quarterly trade confirmations on customer's behalf
2. Has limited trading authority during customer incapacity
3. Must be a licensed registered rep of the same firm
4. May be contacted protectively but cannot trade

Answer: D — May be contacted protectively but cannot trade

A) Trusted contacts do not receive confirmations. B) No trading authority is granted. C) Family members typically serve. D) Correct — Trusted contacts are protective; they lack trading authority.

Open-end mutual fund shares are priced using:

1. Backward pricing at the prior day's NAV
2. Forward pricing at the next computed NAV
3. Continuous intraday bid-ask quotes
4. Monthly closing NAV averages only

Answer: B — Forward pricing at the next computed NAV

A) Backward pricing was banned in the 1960s. B) Correct — Rule 22c-1 requires the next-computed NAV after order receipt. C) Intraday quotes apply to exchange-traded products. D) NAV is struck daily, not monthly.

An order for Fund Z is received by the fund's transfer agent at 4:15 PM ET, five minutes after the fund's 4:00 PM pricing cutoff. At what NAV should the order be priced?

1. Today's 4:00 PM NAV, since the delay was minor
2. The next business day's computed NAV
3. The average of today's and tomorrow's NAV
4. The prior business day's NAV, carried forward

Answer: B — The next business day's computed NAV

B) Correct: orders received after the pricing cutoff must receive the next computed NAV under Rule 22c-1, regardless of how small the delay was. A) 'Minor delay' doesn't create an exception — pricing a late order at today's NAV would be a late-trading violation. C) Averaging NAVs isn't a permitted pricing method. D) Carrying forward the PRIOR day's NAV also violates forward-pricing requirements.

A firm is organizing its records retention schedule. Which pairing of record type and MINIMUM retention period is MOST accurate?

1. Retail communications — 10 years
2. Order tickets — 1 year
3. Customer complaints — 6 months
4. Account records — 6 years after account closure

Answer: D — Account records — 6 years after account closure

D) Correct: account records are generally retained at least 6 years after the account closes under SEC Rule 17a-4. A) Retail communications are generally retained 3 years, not 10. B) Order tickets fall under the broader records retention framework, not just 1 year. C) Complaint records must be retained far longer than 6 months.

Mutual fund redemptions are priced at:

1. The next NAV computed after the redemption request
2. The NAV computed the prior trading day only
3. The average NAV over the last five trading days
4. The customer's original purchase-day NAV price

Answer: A — The next NAV computed after the redemption request

A) Correct — Forward pricing applies to redemptions as well. B) Backward pricing is banned. C) Averaging is not used. D) Purchase price is not redemption price.

What is a Solo 401(k)?

401(k) for self-employed individuals with no employees (besides spouse). Employee deferral + employer profit sharing — combined up to overall 415 limits. Catch-up over 50.

What records must a Series 6 rep maintain?

Customer files, communications, order tickets, complaint records, gift logs, and all approvals. Generally 3+ years (some 6 years) per SEC and FINRA rules.

What is a UIT (Unit Investment Trust)?

Fixed portfolio of securities held until termination. Not actively managed; redeemable units at NAV. Typically used for buy-and-hold strategies.

What is a Coverdell ESA?

Education Savings Account — $2,000 annual contribution limit per beneficiary. Used for K-12 and higher education qualified expenses. Income-based eligibility limits.

What standardized figure must accompany a money market fund's yield quotation?

The current 7-day SEC yield (and, if shown, the effective yield), calculated under a standardized SEC formula — proprietary or cherry-picked yield figures are not permitted as substitutes.

What is a period-certain annuitization option?

Payments continue for a stated number of years regardless of survival; if the annuitant dies before the period ends, a beneficiary receives the remaining guaranteed payments.