Provides Customers with Information About Investments, Makes Suitable Recommendations, Transfers Assets, and Maintains Appropriate Records — Series 6 practice questions

A Series 6 registered representative wants to help a client buy shares of a closed-end fund. In which situation is this within the rep's registration authority?

1. Buying shares on the exchange three years after the fund's IPO
2. Buying shares from another investor in a private secondary transaction
3. Buying shares during the fund's initial public offering
4. Buying shares through a margin account after listing

Answer: C — Buying shares during the fund's initial public offering

C) Correct: Series 6 reps may participate in closed-end fund initial offerings. A) Secondary market exchange trading after the IPO requires Series 7. B) Private secondary transactions in listed securities also fall outside Series 6 authority. D) Margin trading of an exchange-listed security is a Series 7 activity.

A broker-dealer AML program must include:

1. Weekly background checks on all firm customers
2. Written policies and a designated compliance officer
3. Real-time reporting of every wire transfer at once
4. SEC pre-approval of the firm's AML manual annually

Answer: B — Written policies and a designated compliance officer

A) Weekly background checks are not required. B) Correct — FINRA 3310 requires the five AML program pillars. C) Only certain transactions trigger reporting. D) The SEC does not pre-approve AML manuals.

Two funds have similar risk/return profiles and both meet a customer's objectives, but Fund A has a 1.10% expense ratio and Fund B has a 0.55% expense ratio. Under the Care Obligation, what must the rep do if recommending Fund A?

1. Nothing — cost is irrelevant as long as the objective is met
2. Automatically default to whichever fund pays the rep a higher commission
3. Be able to explain why Fund A, despite its higher cost, is still in the customer's best interest given the full picture
4. Disclose the cost difference only if the customer specifically asks about fees

Answer: C — Be able to explain why Fund A, despite its higher cost, is still in the customer's best interest given the full picture

C) Correct: cost is an explicit factor under the Care Obligation; recommending the higher-cost option requires a documented, defensible best-interest rationale. A) Cost is not irrelevant under Reg BI. B) Defaulting to higher rep compensation is precisely the conflict Reg BI addresses. D) Reg BI's disclosure duties aren't contingent on the customer proactively asking.

12b-1 fees are:

1. One-time fees collected at initial purchase
2. Annual fees deducted from fund assets each year
3. A federal tax withheld by the transfer agent
4. A load charged only on Class B shares only

Answer: B — Annual fees deducted from fund assets each year

A) That describes a front-end load. B) Correct — 12b-1 are asset-based ongoing distribution/service fees. C) Not a federal tax. D) 12b-1 exists across share classes.

The 2024 employee 401(k) elective deferral limit is:

1. $19,500 with a $6,500 age-50 catch-up contribution
2. $30,000 flat for all participants of any age tier
3. $23,000 with a $7,500 age-50 catch-up contribution
4. $10,000 across all qualified plans of the taxpayer

Answer: C — $23,000 with a $7,500 age-50 catch-up contribution

A) Those were 2021 limits. B) No flat $30,000 limit exists. C) Correct — 2024 = $23,000 + $7,500 catch-up. D) $10,000 is unrelated.

A fund's 12b-1 fee is broken into a 0.70% distribution component and a 0.25% shareholder service component. Is this fee structure within FINRA's maximum limits?

1. Yes — it is within the 0.75% distribution cap and the 0.25% service cap
2. No — the combined 0.95% exceeds the overall 12b-1 limit
3. No — service fees may not exceed 0.10%
4. Yes — but only if the fund also charges no front-end load

Answer: A — Yes — it is within the 0.75% distribution cap and the 0.25% service cap

A) Correct: 0.70% is within the 0.75% distribution sub-cap and 0.25% is exactly at the shareholder-service sub-cap, totaling 0.95%, under the 1.00% combined maximum. B) 0.95% is below, not above, the 1.00% overall cap. C) The service fee sub-cap is 0.25%, not 0.10%. D) The 12b-1 cap applies regardless of whether the fund also has a front-end load.

A Roth IRA differs from a traditional IRA in that:

1. Contributions are pre-tax and withdrawals are tax-free
2. Contributions are after-tax; qualified withdrawals tax-free
3. Contributions are pre-tax and withdrawals all taxable
4. Contributions are post-tax and withdrawals all taxable

Answer: B — Contributions are after-tax; qualified withdrawals tax-free

A) Pre-tax describes Traditional deductible contributions. B) Correct — That is the defining Roth tax treatment. C) Withdrawals of contributions are always tax-free. D) Roth qualified withdrawals are tax-free.

The Series 6 exam consists of 50 scored items in:

1. Sixty minutes at a passing score of 60 percent
2. Ninety minutes at a passing score of 70 percent
3. One hundred twenty minutes with 80 percent to pass
4. Two hundred forty minutes with 75 percent to pass

Answer: B — Ninety minutes at a passing score of 70 percent

A) Those numbers are lower than the actual exam. B) Correct — Series 6 is 90 minutes at 70% to pass. C) That format is not Series 6. D) That length is unrealistic for Series 6.

A qualified retirement account distribution generally:

1. Always avoids ordinary income tax on withdrawal
2. Requires the account be held for at least 20 years
3. Meets statutory age or event requirements
4. Applies only to Roth IRA holders who convert late

Answer: C — Meets statutory age or event requirements

A) Traditional qualified distributions are still taxed. B) No 20-year rule exists. C) Correct — Statutory triggers such as 59½, death, or disability qualify distributions. D) Qualified distributions apply broadly.

Breakpoints on Class A shares:

1. Reduce sales charges at set investment thresholds
2. Increase the sales charge as purchases grow larger
3. Are prohibited under FINRA Rule 2341 as unfair
4. Apply only to retirement accounts held at the firm

Answer: A — Reduce sales charges at set investment thresholds

A) Correct — Breakpoints step the load down at pre-defined dollar levels. B) Load goes down, not up, at a breakpoint. C) Breakpoints are required, not prohibited. D) Breakpoints apply broadly, not only to IRAs.

When does a Traditional IRA contribution become non-deductible?

When MAGI exceeds phase-out thresholds AND the taxpayer (or spouse) is covered by a workplace retirement plan. Non-deductible basis is tracked on Form 8606.

What is a 401(k) hardship withdrawal?

Allows withdrawal for immediate and heavy financial need (medical, education, primary residence, funeral, etc.). Subject to ordinary income tax + 10% penalty if pre-59½.

What is a closed-end fund?

Investment company with fixed share count. Trades on exchange at market price (premium/discount to NAV). Series 6 reps can sell only at IPO; secondary trading requires Series 7.

What distinguishes an open-end fund's capitalization from a closed-end fund's?

Open-end funds have unlimited, continuously variable capitalization — shares are created and redeemed daily. Closed-end funds raise capital once in an IPO and then trade a fixed number of shares.