Discuss Finra Series-63 Exam Topic 3 Question 5

Which of the following statements regarding an open-end investment company is not true?

AIts shares are bought and sold through the company.

BIts securities are federal covered.

CIts shares may sell for either net asset value or greater than net asset value, but not below

DIts shares are bought and sold on exchange floors.

Suggested Answer: D

The shares of an open-end investment company are not bought and sold on exchange floors. An open-end investment company is a mutual fund, and its shares are bought and sold through the company. The price per share will be either at net asset value as is the case with a no load fund, or above net asset value, as is the situation with a load fund, when the price is equal to net asset value + the sales charge (load.) Open-end investment company shares are federal covered and, as such, do not need to be registered with the state.

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14 comments · newest first

Ahmed 11 months ago

Yeah, D is misleading. Open-end funds don’t trade on exchanges!

Chau 11 months ago

B is correct, those securities are federal covered.

Mel 12 months ago

Wait, are you sure about C? I thought shares could go below NAV sometimes.

Ettie 12 months ago

I agree, D is the one that doesn't fit here.

Ruby 1 year ago

A is definitely true, shares are bought directly from the company.

Samira 1 year ago

I thought all securities from open-end funds were federal covered, so I'm not sure about B either.

Paola 1 year ago

I practiced a similar question where it mentioned that open-end funds don't trade on exchanges, which makes me lean towards D as the answer.

Cherri 1 year ago

I’m a bit unsure, but I think all shares of open-end funds are bought at NAV, so option C could be tricky.

Santos 1 year ago

I remember that open-end funds sell shares directly to investors, so I think option D might be the one that's not true.

Zachary 1 year ago

I feel good about this one. Open-end funds have their securities federally covered, their shares can trade above or at net asset value but not below, and they're bought and sold through the company, not on an exchange. I think B is the statement that's not true.

Herman 1 year ago

I'm a little confused on this one. I know open-end funds are different from closed-end funds, but I'm having trouble recalling all the specifics. I'll need to review my notes to make sure I choose the right answer.

Lynelle 1 year ago

Okay, I've got this. The key is to remember that open-end funds don't trade on exchange floors - their shares are bought and sold directly through the fund itself. I'm pretty confident D is the correct answer.

Dominga 1 year ago

Hmm, I'm a bit unsure about this one. I know open-end funds have their shares bought and sold directly through the company, but I'm not totally clear on the other details.

Jose 1 year ago

This is a tricky one. I'll need to think through the key characteristics of open-end investment companies to determine which statement is not true.

Finra Series-63 Exam - Topic 3 Question 5 Discussion