FINRA Series 6 Investment Company and Variable Contracts Products Representative ExaminationOpening and Maintaining Customer Accounts and Investment RecommendationsMedium
A client expresses interest in purchasing shares of a new mutual fund that has just been launched. To fulfill their due diligence obligations, what information MUST the registered representative provide to the client BEFORE executing the purchase?
- AThe fund's Statement of Additional Information (SAI).
- BA summary prospectus.
- CThe fund's annual report.
- DA copy of the fund's marketing brochure.
Show answer & explanationAnswer & explanation
Correct answer: B. A summary prospectus.
FINRA rules require that a registered representative deliver a prospectus or summary prospectus to a customer at or before the time of sale for a mutual fund. The summary prospectus provides key information in a concise, readable format.
Why the other options are wrong
- A. The SAI provides more detailed information but is not required to be delivered to the customer at the time of sale; it's available upon request.
- C. The annual report is provided periodically after the fund is purchased, not before the sale.
- D. A marketing brochure is promotional material and does not fulfill the legal requirement for prospectus delivery.
Mutual Fund Prospectus Delivery
The legal requirement to provide investors with a mutual fund's prospectus (or summary prospectus) at or before the time of sale.
- Contains essential information about the fund's objectives, risks, fees.
- Summary prospectus is a concise version.
- Mandated by federal securities laws.
Memory trick: Before you buy, the summary must fly.