The go-to guide to acing the Series 26 Exam!
Passing the Investment Company Products/Variable Contracts Limited Principal Qualification Exam (Series 26) qualifies an individual to operate as a principal responsible for supervising and managing a firm and its agents conducting business in open-end mutual funds, variable annuities, and life insurance. The exam covers hiring and qualification, training of representatives, supervision, sales practices, and business processing and recordkeeping rules. A principal must have passed the Series 6 or Series 7 Exams prior to taking the Series 26.
Created by the experts at The Securities Institute of America, Inc., Wiley Series 26 Exam Review 2020 arms you with everything you need to pass this long 110-question multiple-choice test. Designed to help you build and fine-tune your knowledge of all areas covered in the exam and to guarantee that you're prepared mentally and strategically to take the test, it provides:
- Dozens of examples
- Assorted practice questions for each subject area covered in the exam
- Priceless test-taking tips and strategies
- Helpful hints on how to study for the test, manage stress, and stay focused
Table of Contents
About the Series 26 Exam xi
About This Book xv
About the Test Bank xvii
About the Securities Institute of America xix
Chapter 1 Brokerage Office Procedures 1
Hiring New Employees 1
Resignation of a Registered Representative 3
Registration Exemptions 4
Persons Ineligible to Register 4
Disciplinary Actions against a Registered Representative 5
Termination for Cause 6
Outside Employment 7
Private Securities Transactions 7
Gift Rule 7
Sharing in a Customer’s Account 8
Borrowing and Lending Money 9
Order Tickets 9
Executing an Order 9
Becoming a Stockholder 11
Close Outs 15
Dividend Distribution 21
Pretest 25
Chapter 2 Record Keeping, Financial Requirements, and Reporting 29
Types of Records 29
Storage Requirements 31
Financial Requirements 35
Pretest 49
Chapter 3 Recommendations to Customers 55
General Guidelines 55
Suitability Standards 56
Mutual Fund Suitability 57
Exchange-Traded Funds (ETFs) 61
Periodic Payment Plans 63
Mutual Fund Current Yield 63
Suitability 63
Fair Dealings with Customers 63
Recommendations to an Institutional Customer 67
Short Sales in Connection with Recommendations 68
Issuing Research Reports 68
Regulation FD (Fair Disclosure) 71
Recommendations through Social Media 71
Pretest 77
Chapter 4 General Supervision 81
The Role of the Principal 81
Supervisor Qualifications and Prerequisites 82
Continuing Education 83
Tape Recording Employees 85
Heightened Supervisory Requirements 85
Information Obtained from an Issuer 86
Customer Complaints 86
Investor Information 87
Member Offices 87
Currency Transactions 90
The Patriot Act 90
Identity Theft 92
FINRA Rules on Financial Exploitation of Seniors 93
Pretest 95
Chapter 5 Customer Accounts 99
New Accounts 99
Holding Securities 101
The Depository Trust Company (DTC) 102
Mailing Instructions 103
Types of Account Ownership 103
Trading Authorization 105
ABLE Accounts 110
Accounts for Employees of Other Broker Dealers 111
Numbered Accounts 112
Prime Brokerage Accounts 112
Account Transfer 112
Margin Accounts 114
Day Trading Accounts 115
Commingling Customers’ Pledged Securities 116
Wrap Accounts 116
Regulation S-P 116
Pretest 119
Chapter 6 Investment Companies 123
Investment Company Philosophy 123
Types of Investment Companies 124
Investment Company Registration 127
Investment Company Components 129
Mutual Fund Distribution 131
Mutual Fund Prospectus 132
Anti-Reciprocal Rule 135
Valuing Mutual Fund Shares 135
Sales Charges 137
Taxation of Mutual Funds 144
Voting Rights 149
Yields 149
Portfolio Turnover 150
Purchasing Mutual Fund Shares 150
Withdrawal Plans 153
Recommending Mutual Funds 154
Structured Retail Products/SRPs 155
Pretest 157
Chapter 7 Variable Annuities, Life Insurance, and Retirement Plans 161
Annuities 161
Life Insurance 171
Health Savings Accounts 177
Retirement Plans 178
Death of an IRA Owner 183
ERISA 404C Safe Harbor 191
Department of Labor Fiduciary Rules 191
Pretest 193
Chapter 8 Securities Industry Rules and Regulations 197
Issuing Securities 197
The Securities Exchange Act of 1934 200
The National Association of Securities Dealers (NASD) 203
Becoming a Member of FINRA 205
Foreign Broker Dealers 207
Compensation Paid to Unregistered Persons 207
Registration of Agents/Associated Persons 208
Retiring Representatives/Continuing Commissions 209
State Registration 209
Communications with the Public 209
Securities Investor Protection Corporation Act of 1970 (SIPC) 215
The Securities Acts Amendments of 1975 217
The Insider Trading & Securities Fraud Enforcement Act of 1988 217
Telemarketing Rules 218
The Penny Stock Cold Call Rule 219
Violations and Complaints 220
Political Contributions 224
Investment Adviser Registration 225
Investment Adviser Representatives 227
Investment Adviser Advertising and Sales Literature 228
Investment Adviser Brochure Delivery 229
Soft Dollars 229
Broker Dealers on the Premises of Other Financial Institutions 231
The Uniform Securities Act 232
Sarbanes-Oxley Act 232
SEC Regulation S-K 234
SEC Regulation M-A 235
The Hart-Scott-Rodino Act 236
FINRA Rule 5150 (Fairness Opinion) 237
SEC Regulation S-X 237
Pretest 239
Answer Keys 243
Glossary of Exam Terms 251
Index 317
