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FINRA Investment Company and Variable Contracts Products Representative Examination (IR) Sample Questions:
1. GoForBroke Broker-Dealers has distributed a list of ten mutual funds that it suggests are top-notch funds
worthy of recommendation by GoForBroke's agents. Coincidentally, all the funds on this list also happen
to be those that execute the majority of their trades through GoForBroke. Is GoForBroke in violation of
any FINRA rules?
A) Yes. By distributing a list naming specific funds that coincidentally all happen to execute a lot of trades
through GoForBroke, the broker-dealer is violating FINRA's anti-reciprocal rule.
B) No. As long as the list consists of more than five funds, GoForBroke has not violated any FINRA rules.
C) Yes. GoForBroke is prohibited from selling shares of mutual funds that execute their trades through the
broker-dealer. This rule is in place to avoid conflicts of interest.
D) No. GoForBroke only distributed a list of fund names; it did not offer its agents any form of additional
compensation for selling the funds on that list.
2. An exchange-traded fund (ETF):
A) is bought and sold at the net asset value of the fund.
B) is a type of closed-end investment company.
C) can be structured as either a mutual fund or a unit investment trust.
D) charges no management fees.
3. A FINRA member who is a principal underwriter under the definition provided in the Investment Company
Act of 1940 is permitted to sell variable contracts through another broker-dealer only if:
I. the broker-dealer is also a FINRA member.
II. there is a sales agreement in effect between the underwriter and the broker-dealer.
III. the broker-dealer is also a principal underwriter as defined by the Investment Company Act of 1940.
A) all three statements-I, II, and III-are true.
B) either I or II is true.
C) both I and II are true.
D) any one of the three statements-I, II, or III-are true.
4. Ralph has a traditional IRA from which he has yet to make any withdrawals. Ralph will be turning 70 1/2 in
June, 2011.According to the required minimum distribution rule associated with traditional IRAs, Ralph is
required to start withdrawing funds from this account:
A) on April 15, 2011.
B) no later than the day after he turns 70 1/2 .
C) on April 15, 2012.
D) on April 1, 2012.
5. Tex Payor is an investor in the Invest4U Mutual Fund. The manager of the fund, fearing a substantial
decline in the stock market, sold a lot of the fund's holdings to lock in profits. As a result, the fund earned a
lot of long-term capital gain income. Which of the following statements is true regarding the tax treatment
of this income?
A) Tex must pay taxes on his proportionate share of the long-term capital gain income earned by Invest4U,
whether distributed or not.
B) Tex must pay taxes on that portion of the long-term capital gain income that Invest4U distributes to
him.
C) Tex must pay taxes only on dividend income distributed by Invest4U.The mutual fund itself pays tax on
any capital gains it earns.
D) None of the above is a true statement.
Solutions:
| Question # 1 Answer: A | Question # 2 Answer: C | Question # 3 Answer: C | Question # 4 Answer: D | Question # 5 Answer: B |








