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One of your clients invested $75,000 in the fund. The worth of the client's investment has now fallen to $68,000. The client wishes to invest an additional $5,000 and wants to know what the sales charges will be on the $5,000 investment. Which is CORRECT regarding the charges to the client on the additional investment?
[A]The client will have to pay the 7% sales charge because the client is only investing $5,000 at this
time.
[B]Because the client's investment is only worth $68,000 and the additional $5,000 does not push that value over $75,000, the client will have to pay 6%.
[C]The client will have to pay a sales charge of 5.5% because the original investment was $75,000 and the client wishes to invest an additional $5,000.
[D]Because the client's other investments at the firm are not known, there is no way to determine the sales charge.
[C]The client will have to pay a sales charge of 5.5% because the original investment was $75,000 and the client wishes to invest an additional $5,000.
When covering questions on "Breakpoints" and "Rights of Accumulation" it is very important to thoroughly read the full question. Under "Rights of Accumulation" regulations, an investment company may base charges on NAV plus additional investments, amount invested plus additional investment, or the higher of the two. Here, the "Rights of Accumulation" are based on "AMOUNTS INVESTED." Since the investor has put up $75,000 already, and intends to invest an additional $5,000, the investor would get the breakpoint rate of 5.5%, even though NAV plus the $5,000 is less than $75,000.
A broker/dealer firm has become insolvent. SIPC liquidation procedures have begun. Jill and Jack are married and each of them have individual accounts along with a joint account with each other at the firm. The following are their
account balances: Jill's individual account has $275,000 in fully-paid securities Jack's individual account has $265,000 in fully-paid securities Jill and Jack's joint account has $475,000 in fully-paid securities What would SIPC cover in relation to these accounts?
[A]SIPC coverage would total $500,000 for the three accounts since the two parties are married.
[B]SIPC coverage would pay $275,000 for Jill's account, $265,000 for Jack's account, and $475,000 for the joint account.
[C]SIPC
coverage would pay $1,500,000 in this case, because each account is insured for $500,000, regardless of the amount held when the broker/dealer firm became insolvent.
[D]SIPC would not cover any of these claims.