Finra Series-6 Exam - Topic 10 Question 93 Discussion

Actual exam question for Finra's Series-6 exam

Question #: 93
Topic #: 10

The AGRO Mutual Fund invests in aggressive growth stocks of midcap corporations. The fund is running an advertisement on the radio that informs the listeners that AGRO earned a 22% return last year while the S&P 500 Index returned only 10%. The ad also contains information regarding how an interested investor can contain a fund prospectus.

Has AGRO violated any securities laws with this advertisement?

ANo. This would be considered a generic advertisement and not an offer to sell.

BNo. In addition to providing the listeners with its own return last year, AGRO appropriately provided the listeners with a benchmark return; thus there has been no violation of any laws.

CYes. Although AGRO provided the return on the S&P 500 as well as its own return, the S&P 500 Index is comprised of average risk stocks and is not an appropriate benchmark for AGRO to use.

DYes. AGRO is required to provide information on the specific investments it made to earn that 22% return, given that the return is unusually high.

Show Suggested Answer

Suggested Answer: D

Neither Class B nor Class C shares have front-end loads. Class B and Class C shares typically have higher 12b -1 fees, however, with Class C having the highest 12b-1 fees of the three classes.

by Layla at Nov 14, 2024, 10:26 PM

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Lang

4 months ago

Just a reminder, past performance doesn’t guarantee future results!

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Donte

4 months ago

I agree, using the S&P 500 as a benchmark feels off.

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Mauricio

4 months ago

22% last year? Seems too good to be true.

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Gearldine

4 months ago

I think they did it right by including the benchmark return.

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Golda

5 months ago

AGRO's return is impressive, but is it sustainable?

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Moira

5 months ago

I lean towards option D because if the return is unusually high, they should disclose more about their investments. It seems like a good rule to follow.

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Serita

5 months ago

I’m a bit confused about whether the S&P 500 is a suitable benchmark for AGRO. I feel like I read something about benchmarks needing to match the fund's risk profile.

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Lashonda

5 months ago

I think option B makes sense because they provided a benchmark return, which seems like a good practice. It reminds me of a similar question we did in class.

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Flo

5 months ago

I remember discussing how advertisements must be clear and not misleading, but I'm not sure if mentioning the S&P 500 is enough to avoid violations.

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Edda

5 months ago

This is a tricky one. The fund's high return compared to the S&P 500 is a red flag, and I'm not sure the benchmark they used is appropriate. I'll need to really dive into the securities regulations to figure out if they crossed any lines here.

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Shizue

5 months ago

Okay, let's see. The key things I need to focus on are whether AGRO provided appropriate benchmark information and whether they need to disclose more details about their investments and strategy. I think I can work through this step-by-step.

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Delfina

5 months ago

Hmm, I'm a little unsure about this one. The question is asking if AGRO violated any laws, but it's not totally clear to me what the specific legal requirements are for fund advertisements. I'll need to think through the details carefully.

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Shaun

6 months ago

This seems like a pretty straightforward question about securities laws and fund advertising. I think I've got a good handle on the key issues to consider.

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Kristofer

10 months ago

Wait, did AGRO use the word 'only' when describing the S&P 500's return? That's a bit cheeky, don't you think?

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Jamal

9 months ago

D) Yes. AGRO is required to provide information on the specific investments it made to earn that 22% return, given that the return is unusually high.

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Felix

9 months ago

C) Yes. Although AGRO provided the return on the S&P 500 as well as its own return, the S&P 500 Index is comprised of average risk stocks and is not an appropriate benchmark for AGRO to use.

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Gertude

9 months ago

B) No. In addition to providing the listeners with its own return last year, AGRO appropriately provided the listeners with a benchmark return; thus there has been no violation of any laws.

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Fletcher

10 months ago

A) No. This would be considered a generic advertisement and not an offer to sell.

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Chaya

10 months ago

Hmm, I'm leaning towards option A. It's just a generic advertisement, not an offer to sell, so I don't see any issues with it.

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Chara

10 months ago

Haha, option D is a bit too much, isn't it? AGRO isn't required to give a detailed breakdown of its investments, that would be overkill.

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Keshia

10 months ago

I'm not so sure about that. Option C seems more plausible to me. The S&P 500 is not an appropriate benchmark for an aggressive growth fund like AGRO.

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Lavina

9 months ago

I agree with you. Option C does make sense, but I can see how Option B could also be a valid argument.

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Eleni

9 months ago

I think Option B is the correct choice. AGRO provided the listeners with its own return as well as a benchmark return, so there should be no violation of any laws.

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Nieves

9 months ago

Option C seems more plausible to me. The S&P 500 is not an appropriate benchmark for an aggressive growth fund like AGRO.

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Roy

11 months ago

I think option B is correct. AGRO provided the listeners with its own return as well as a benchmark, which is a standard practice in the industry.

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Derick

10 months ago

I think the advertisement was informative and transparent. Option B is definitely the correct answer in this case.

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Giuseppe

10 months ago

It's important for investors to have that comparison with a benchmark like the S&P 500. AGRO did the right thing by including that information in their advertisement.

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