Taxation and Rules for Packaged Securities - dummies

By Steven M. Rice

Pretty much all investors have packaged securities in their portfolio. What’s also nice about packaged securities for investors is that usually the funds are professionally managed, and the management fee is relatively small.

For the Series 7 exam, you should be aware of which funds are best for which investors according to their investment objectives.

Practice questions

  1. Who is responsible for the safekeeping of the securities owned by a mutual fund?

    A. the custodian bank

    B. the registrar

    C. the investment adviser

    D. the transfer agent

    Answer: A. the custodian bank

    The custodian bank is responsible for the safekeeping of securities and cash held by the mutual fund.

  2. How much money must a mutual fund raise before a public offering?

    A. $50,000

    B. $100,000

    C. $500,000

    D. $1,000,000

    Answer: B. $100,000

    A mutual fund must have at least $100,000 in private capitalization prior to making a public offering. In addition, they must have at least 100 investors and investment objectives that are clearly defined.

  3. A mutual fund announces that it will pay a dividend to shareholders of record Friday, May 10. When is the ex-dividend date?

    A. Thursday, May 9

    B. Wednesday, May 8

    C. Tuesday, May 7

    D. on the date set by the board of directors

    Answer: D. on the date set by the board of directors

    The ex-dividend date for common and preferred stock is automatically two business days before the record date. However, mutual funds may set the ex-dividend date at any time determined by the board of directors.