Discuss Finra Series-6 Exam Topic 6 Question 67

NewWave Investments, a family of mutual funds, hires the star of a new motion picture about the workings of Wall Street to provide a testimonial as part of NewWave's new television ad campaign. The actor's financial adviser has, in fact, invested some of the actor's monies in NewWave's funds. NewWave provides the actor with a script in which the actor explains the concept of dollar cost averaging to the viewers. At the conclusion of the actor's explanation, the viewers are informed that the actor has been paid for his testimonial, that his experience may not be representative of that of other clients, and that past performance is no guarantee of future performance. Based on these facts:

ANewWave has violated no rules; it has complied with all of FINRA's disclosure requirements.

BNewWave has violated a FINRA rule stipulating that testimonial providers can receive no payment for their testimonies.

CNewWave has violated a FINRA rule that prohibits testimonials of public figures from being used advertisements.

DNewWave has violated a FINRA rule requiring that any testimonial that contains a technical aspect related to investing must be given by someone who has both the knowledge and experience to hold a valid opinion on the topic.

Suggested Answer: D

The false statement regarding both a UGMA and a UTMA is that the assets must be re-registered in the minor child's name when the child turns 18. The rule differs between the two types of accounts. The UGMA requires that the assets must be re-registered when the child reaches the ''age of majority,'' as defined by the state, and the definition differs among states. Under the UTMA, the transfer of the account can be delayed until the minor child has reached the age of 25.

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38 comments · newest first

Catarina 11 months ago

But isn't it weird to pay someone for a financial opinion?

Beatriz 11 months ago

I think they might be pushing it with that testimonial.

Truman 12 months ago

Wait, can an actor really explain dollar cost averaging?

Kaycee 12 months ago

I agree, seems compliant with FINRA rules.

Michal 1 year ago

Sounds like they covered their bases with the disclosures.

Lashandra 1 year ago

I thought that any technical explanation had to come from someone with expertise. I'm leaning towards option D, but I need to double-check the rules on that.

Eleonora 1 year ago

I feel like there's a rule against using public figures for testimonials, but I can't remember if it applies here since they disclosed the payment.

Regenia 1 year ago

I think I saw a similar question about testimonials in our practice exams. If the actor is paid, it might violate some FINRA rules, but I can't recall the specifics.

Corazon 1 year ago

I remember discussing testimonials in class, but I'm not sure if paying the actor is a violation. It seems like it could be okay if they disclosed it properly.

Kara 1 year ago

I'm a bit unsure on this one. The actor's financial background is relevant, but the disclosures may be enough to satisfy the rules. I'll have to think it through carefully.

Adell 1 year ago

I'm pretty confident this is option A. The question states the required disclosures were provided, so NewWave appears to have complied with the rules.

Jess 1 year ago

I'm leaning towards B. Paying the actor for the testimonial seems like it would violate a FINRA rule, even if the other disclosures are made.

Celeste 1 year ago

Hmm, the key seems to be whether the actor's financial experience is representative of other clients. If not, then I think option D is the way to go.

Sage 1 year ago

This seems like a tricky one. I'll need to carefully review the FINRA rules on testimonials and disclosures to determine which one applies here.

Trina 1 year ago

The Empirical Rule sounds familiar, but I'm having trouble recalling the specifics. I'll make sure to study that concept and how it's used to estimate probabilities based on the standard deviation.

Barbra 1 year ago

I'm not too familiar with Cisco Meraki, but the advanced replacement service sounds like a pretty valuable benefit. I'll go with option B.

Meaghan 1 year ago

Okay, I've got a strategy for this. I'll eliminate the options that are things we can control, like testing, requirements, and usage. That should help me narrow it down to the right answer.

Leontine 1 year ago

I'm just picturing the actor on set, rehearsing that dollar cost averaging line over and over again. Gotta earn that paycheck!

Ressie 1 year ago

↳ replying to Leontine

C) Yeah, I agree. NewWave has violated a FINRA rule that prohibits testimonials of public figures from being used in advertisements.

Shawnta 1 year ago

↳ replying to Leontine

B) I think NewWave has violated a FINRA rule stipulating that testimonial providers can receive no payment for their testimonies.

Refugia 1 year ago

↳ replying to Leontine

A) NewWave has violated no rules; it has complied with all of FINRA's disclosure requirements.

William 2 years ago

Yeah, and imagine the actor reading that script like it's his own words. Option C is the one, FINRA doesn't allow public figure testimonials in ads.

Reuben 1 year ago

↳ replying to William

Even if the actor's financial adviser invested in the funds, they still can't use a public figure in the ad according to FINRA rules.

Arlette 1 year ago

↳ replying to William

But the actor's financial adviser invested in NewWave's funds, so maybe that's why they used him.

Jolene 1 year ago

↳ replying to William

I agree, using a public figure in the ad is a violation of FINRA rules.

Matthew 2 years ago

Haha, I bet the actor's financial adviser is laughing all the way to the bank! Option B is the way to go - no payment for testimonials, that's the rule.

Thomasena 2 years ago

I disagree. Option D seems more appropriate to me. The actor may not have the knowledge and experience to provide a valid opinion on the technical concept of dollar cost averaging.

Lynsey 1 year ago

↳ replying to Thomasena

That's true, but it's still important for someone providing a testimonial on a technical aspect of investing to have the necessary knowledge and experience.

Lindsey 1 year ago

↳ replying to Thomasena

But the actor's financial adviser has invested in NewWave's funds, so maybe he has some knowledge about it.

Willow 2 years ago

↳ replying to Thomasena

I think Option D is correct. The actor might not be qualified to explain dollar cost averaging.

Eliseo 2 years ago

I'm not sure, but I think NewWave may have violated a FINRA rule that prohibits testimonials of public figures from being used in advertisements.

Aracelis 2 years ago

I disagree, I believe NewWave has complied with all of FINRA's disclosure requirements.

Chan 2 years ago

I think option A is correct. NewWave has disclosed the actor's payment and the fact that his experience may not be representative. As long as they comply with FINRA's disclosure requirements, they haven't violated any rules.

Franchesca 1 year ago

↳ replying to Chan

Yeah, as long as they follow the rules, it's all good.

Rashida 1 year ago

↳ replying to Chan

I agree, as long as they disclose everything, it should be fine.

Vincenza 1 year ago

↳ replying to Chan

I think they did what they needed to do to follow the rules.

Nada 2 years ago

↳ replying to Chan

I agree, as long as they disclose everything, they should be fine.

Tu 2 years ago

I think NewWave has violated a FINRA rule stipulating that testimonial providers can receive no payment for their testimonies.

Finra Series-6 Exam - Topic 6 Question 67 Discussion