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FINRA Investment Company and Variable Contracts Products Representative Examination (IR) Sample Questions:
1. Which of the following is not one of the purposes of FINRA as stated in its articles of incorporation?
A) police members and assist with dispute settlements
B) maintain a fair and orderly securities market
C) develop lines of communication between the securities industry and governmental agencies
D) encourage members to uphold high ethical standards
2. Which of the following would be a reason for a person to receive a statutory disqualification from
membership in FINRA?
A) All of the above are reasons for a person to receive a statutory disqualification from membership in
FINRA.
B) The person has been barred from membership in one of the national exchanges.
C) The person has made a misleading statement of material fact on the membership application.
D) The person is on the verge of financial insolvency.
3. Tex Payor bought shares of the Stocks4U Mutual Fund on February 26th.During the year, the fund sold
some of the stocks in which it was invested, generating long-term capital gain income for the fund. Tex
received a distribution of some of these gains at the end of the year, based on his proportionate
ownership of the fund. Which of the following statements is true regarding the tax consequences of this
distribution to Tex?
A) Tex will have to pay tax on the distribution at his marginal tax rate. Since Tex had not been invested in
the fund for over 12 months when the distribution occurred, it is considered to be short-term capital gain
income for him, which is taxed as ordinary income.
B) There are no tax consequences to Tex. Mutual fund investors are taxed only on dividend distributions
and on capital gains realized when they sell shares of a fund that they own. Capital gains earned by the
fund when securities are bought and sold by the fund's manager are taxed to the fund.
C) Tex will have to pay tax on the distribution unless he opts to reinvest the distribution in the fund, in
which case the income will not be taxable.
D) Tex will have to pay tax on the distribution at the tax rate for long-term capital gains, which are currently
taxed preferentially.
4. The difference between a "redemption fee" and a "rear-end load" is that:
A) the redemption fee refers to charges incurred by the fund when it sells securities it owns; the rear-end
load is a fee that is incurred by investors in the fund when they redeem their shares of the fund.
B) the redemption fee is another name for a 12b-1 fee, which is an annual expense associated with the
fund.
C) a rear-end load is used to compensate a salesperson who has sold shares of the fund; a redemption
fee is charged to offset the expenses a fund incurs in processing share redemptions.
D) There is no difference. These are synonymous terms.
5. The fees that member firms must pay to FINRA are based on:
I. the totalmarket value of its assets.
II. the number of registered representatives it employs.
III. the number of branch offices it has.
A) I only
B) II and III only
C) I and III only
D) I, II, and III
Solutions:
| Question # 1 Answer: B | Question # 2 Answer: A | Question # 3 Answer: D | Question # 4 Answer: C | Question # 5 Answer: B |






