FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationOpening and Maintaining Customer Accounts and Investment RecommendationsEasy
A client is interested in purchasing shares of a mutual fund. The registered representative explains the fund's objectives, historical performance, and fees. Before the client can make a purchase, which of the following documents MUST be delivered to the client?
- AThe fund's prospectus.
- BThe fund's annual report.
- CThe Statement of Additional Information (SAI).
- DA copy of the broker-dealer's privacy policy.
Show answer & explanationAnswer & explanation
Correct answer: A. The fund's prospectus.
FINRA rules require that a mutual fund prospectus be delivered to a client at or before the time of sale. It contains essential information about the fund's objectives, risks, fees, and expenses.
Why the other options are wrong
- B. The annual report provides financial information but is not required before sale.
- C. The SAI provides more detailed information than the prospectus but is not typically required before the sale.
- D. The privacy policy is delivered, but not specifically required before a mutual fund purchase.
Mutual Fund Prospectus Delivery
A legal document that mutual funds are required to provide to prospective investors, detailing essential information about the fund.
- Must be delivered at or before the time of sale.
- Includes objectives, risks, fees, expenses, historical performance, and management information.
- Ensures investors have sufficient information to make informed decisions.
Memory trick: Prospectus first, then you can invest.