| 1. Which of the following phrases should raise your concern about an investment? |
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a. High rate of return |
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b. Risk-free |
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c. Your investment is guaranteed against loss |
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d. You must invest now |
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e. All of the above |
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| 2. Securities laws protect investors by requiring companies to: |
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a. Show profits before they can sell stock |
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b. Provide investors with specific information about the company |
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c. Pay dividends |
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d. Repay investors who have lost money |
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| 3. In which situation are you taking the least amount of risk? |
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a. Buying a Certificate of Deposit (CD), in United States, or a Guaranteed Investment Certificate (GIC), in Canada, from a bank |
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b. Investing with someone you know through your church or community association |
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c. Investing offshore |
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d. Investing with someone who contacted you by phone |
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| 4. A fellow book club member tells you about an investment opportunity that has earned returns of 20% during the past year. Your investments have been performing poorly and you’re interested in earning higher returns. This person is your friend and you trust them. What should you do? |
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a. Ask your friend for more information about the investment so that you can understand the risks before you make a decision |
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b. Invest only a small amount to see how things go before making a larger investment |
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c. Call your securities regulator to see if the investment has been registered or is properly exempted for sale |
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d. a and c |
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| 5. Which of the following should you rely upon when making an investment decision? |
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a. Testimonials of other investors |
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b. Advertisements and news stories in the media or on the Internet |
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c. Technical data that you don’t really understand |
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d. Information filed with your securities regulator |
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| 6. Ways to protect yourself from investment fraud include: |
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a. Read all disclosure documents about an investment |
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b. Seek advice from an independent and objective source |
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c. Be skeptical and ask questions |
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d. Never write the check/cheque for an investment in the name of your salesperson |
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e. All of the above |
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| 7. When dealing with a securities salesperson who is considered reputable, you should do all the following except: |
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a. Request copies of opening account documentation to verify that your investment goals and objectives are stated correctly |
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b. Open and review all correspondence and account statements when you receive them |
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c. Verify your written account statements with information you can obtain online |
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d. Allow the salesperson to manage your assets as they see fit because they are the expert |
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e. Evaluate your salesperson's recommendations by doing your own independent research |
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| 8. Which of the following are frequently used to defraud the public? |
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a. Short-term promissory notes |
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b. Prime bank investments |
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c. Offshore investments to avoid taxes |
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d. Nigerian advance fee letters |
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e. All of the above |
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| 9. The role of government securities regulators is to: |
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a. Sell shares to investors |
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b. Act as an association for securities dealers and advisers |
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c. Regulate securities markets, the investment industry and protect investors |
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d. All of the above |
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| 10. You have been working closely with your securities salesperson for years. Recently your salesperson asked you to invest in a product that he/she is really excited about, however, the recommendation seems very different from financial products you have invested in previously. Which of the following should you do? |
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a. Agree to make the investment because you have done business with your salesperson for years and trust them implicitly |
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b. Check with your securities regulator to see if they have any information on the investment product |
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c. Check with your securities regulator to see if the securities salesperson is authorized to sell the product in question |
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d. Rely upon the written material the salesperson gives you |
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e. a & d only |
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f. b & c only |
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| 11. An investment is likely to be legitimate if: |
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a. The promotional materials and company website look professional |
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b. The company has a prestigious office location |
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c. Other investors are receiving quick up-front returns |
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d. The company has an official-sounding name |
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e. None of the above |
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| 12. Who insures you against investment losses? |
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a. No one; this is the risk you take when you invest |
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b. My securities regulator |
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c. The company selling the investment |
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d. The Securities Investor Protection Corporation (SIPC) in United States or the Canadian Investor Protection Fund (CIPF) in Canada |
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