Series 51 Example Questions
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Sample Questions
1)
Which of the following municipal fund advertisements are exempt from the required disclosures?
A ) Blind advertisements
B ) Advertisements delivered through an electronic medium
C ) Product advertisements not specifically identified
D ) No load fund advertisements
See Answer
Answer: The Best Answer is A
Feedback: Blind advertisements are advertisements that do not identify a broker-dealer, providing only issuer contact information for obtaining an official statement and a short slogan of the issuer’s general objectives. Generic advertisements, limited to explanatory information relating to municipal fund securities in general, also are exempt.
2)
Subsidiary records must be maintained by non-bank municipal securities dealers for:
A ) The lifetime of the firm
B ) At least six years
C ) At least three years
D ) At least four years
See Answer
Answer: The Best Answer is D
Feedback: Non-bank municipal securities dealers must preserve subsidiary records for at least four years. Bank dealers, including those municipal securities dealers that are a subsidiary or division of a bank, must preserve them for three years.
3)
Rolling over a 529 plan from one state’s plan to another state’s plan:
A ) Is not permitted
B ) Is permissible if done once per 12-month period
C ) Never has state tax consequences
D ) Can be accomplished without
See Answer
Answer: The Best Answer is B
Feedback: Besides rolling over the fund from one beneficiary to another, the funds in a 529 plan can also be rolled over from:
· One kind of 529 plan to another (e.g., college savings plan to prepaid tuition plan)
· One state’s 529 plan to another state’s 529 plan
Each of these types of rollovers can be conducted without any tax consequences if the funds are deposited in the new account within 60 days of withdrawal from the old account. Plan to plan rollovers may only be done once in a 12-month period. There may be state tax implications for rollovers from one state’s 529 plan to another state’s 529 plan. Some states may try to “recapture” state income tax deductions given to residents that opened a college savings plan in that state when they roll over to another state’s plan by imposing taxes on withdrawals of earnings from the out-of-state plan.
4)
Which two of the following are required of municipal securities dealers when an associated person from another broker or dealer opens an account at their firm?
A ) I and II
B ) II and IV
C ) I and IV
D ) II and III
See Answer
Answer: The Best Answer is A
Feedback: Before an employee of another broker or dealer can open an account with a municipal securities dealer, the dealer must notify the employer in writing and provide duplicate confirmations to the employer.
5)
Which of the following is not true of LGIPs?
A ) LGIP management firms may charge sales fees and commissions for their services, as well as collect management and administrative fees out of the assets in the fund
B ) Participants in an LGIP may only purchase shares directly through the government issuer
C ) By pooling their funds, the participants benefit from economies of scale, diversification, professional portfolio management, and liquidity
D ) LGIPs are authorized by state law and may be managed by government employees or investment management firms
See Answer
Answer: The Best Answer is B
Feedback: Local Government Investment Pools (LGIPs) are trusts established by local governments that allow municipal entities to invest their money in a variety of securities. The government entities purchase interests in the trust, and the assets are invested according to the trust’s stated investment objectives and state laws. By pooling their funds, the participants benefit from economies of scale, diversification, professional portfolio management, and liquidity. LGIPs are authorized by state law and may be managed by government employees or investment management firms. Participants in an LGIP may purchase shares directly through the government issuer or through a private investment management firm. LGIP management firms may charge sales fees and commissions for their services, as well as collect management and administrative fees out of the assets in the fund.