Series 6 Exam Questions & Answers 2026 (11–20)

Question 1

A UIT sponsor is required to maintain a secondary market for UIT units primarily to ensure that:

TheoryPractice · Accepted Answer

Investors have a way to liquidate their units before the trust's termination date. Because UITs do not continuously redeem units like open-end funds, sponsors are expected to maintain a secondary market so investors are not locked in and can exit their position prior to the trust's stated maturity or termination.

Question 2

Under the Investment Company Act of 1940, an open-end investment company is prohibited from doing which of the following?

TheoryPractice · Accepted Answer

Issuing senior securities such as bonds or preferred stock. The Investment Company Act of 1940 prohibits open-end investment companies from issuing senior securities (debt or preferred equity), a restriction that distinguishes them structurally from closed-end funds, which may use leverage through bond issuance.

Question 3

An investor in a mutual fund reinvests her capital gains distribution back into the fund. Which of the following statements about the tax treatment is CORRECT?

TheoryPractice · Accepted Answer

The distribution is taxable in the year received even though it was reinvested, and the reinvested amount becomes the cost basis of the new shares. Mutual fund capital gains distributions are taxable to shareholders in the year distributed regardless of whether they are taken in cash or reinvested; the reinvested amount establishes a new cost basis for the additional shares purchased.

Question 4

Which of the following entities is MOST directly responsible for calculating the daily NAV of an open-end mutual fund?

TheoryPractice · Accepted Answer

The fund's custodian or transfer agent, under direction of the fund's board. The fund's custodian (holding securities) and transfer agent (tracking shares outstanding) work under the board of directors' oversight to value portfolio holdings and compute NAV at least once each business day, typically at 4:00 PM ET.

Question 5

A fund family offers a 'combination privilege' to investors. An investor holds $30,000 in Fund A and wants to buy $15,000 of Fund B within the same family. The $50,000 breakpoint for a reduced load applies at the family level. Which outcome is MOST accurate?

TheoryPractice · Accepted Answer

The investor qualifies for the reduced load on the $15,000 purchase because the combined holdings of $45,000 may be aggregated toward the breakpoint under the combination privilege. A combination privilege (also called a family of funds privilege) allows investors to aggregate holdings across multiple funds within the same fund family to qualify for breakpoint discounts, recognizing total dollars committed to the sponsor.

Question 6

A closed-end fund conducts its initial public offering, raising capital by selling a fixed number of shares. After the IPO, an investor who wants to buy additional shares of this fund MUST:

TheoryPractice · Accepted Answer

Purchase shares from another investor in the secondary market at the prevailing market price. After its IPO, a closed-end fund does not continuously issue new shares; investors must buy and sell existing shares on a stock exchange or in the over-the-counter market at market-determined prices, just like any publicly traded stock.

Question 7

A 58-year-old client holds a variable annuity with a 7-year surrender charge schedule and is now in year 4. She recently lost her job and wants to make a full withdrawal. Which of the following BEST describes the tax and cost consequences she will face?

TheoryPractice · Accepted Answer

Ordinary income tax on gains plus a 10% IRS early withdrawal penalty plus a surrender charge on the amount withdrawn. Withdrawals from a non-qualified variable annuity before age 59½ are subject to ordinary income tax on the earnings (LIFO treatment), a 10% IRS early withdrawal penalty, and any applicable contractual surrender charge imposed by the insurance company.

Question 8

During the accumulation phase of a variable annuity, the owner's account is credited with accumulation units. When the owner annuitizes, accumulation units are converted to annuity units. Which statement accurately describes what happens to the NUMBER of annuity units after annuitization begins?

TheoryPractice · Accepted Answer

The number of annuity units remains fixed for each payment period, while the dollar value of each unit fluctuates with subaccount performance. After annuitization, the number of annuity units is fixed; only the dollar value per unit varies with subaccount investment performance relative to the assumed interest rate (AIR), causing payment amounts to fluctuate up or down each period.

Question 9

A variable life insurance policy's separate account has underperformed for three consecutive years, reducing the policy's cash value significantly. The policyholder is concerned about losing coverage entirely. Which feature of variable life insurance MOST directly protects the policyholder from having the policy lapse due to poor investment performance?

TheoryPractice · Accepted Answer

The guaranteed minimum death benefit equal to the original face amount. Variable life insurance provides a guaranteed minimum death benefit equal to the original face amount regardless of subaccount performance, ensuring the policy does not lapse solely because of poor investment returns.

Question 10

A registered representative recommends a variable annuity inside a Traditional IRA. A compliance officer flags this as potentially unsuitable. Which argument MOST compellingly supports the compliance officer's concern?

TheoryPractice · Accepted Answer

Variable annuities provide tax-deferred growth, a benefit the IRA already provides, so the additional insurance charges may not be justified by any incremental tax benefit. Placing a variable annuity inside a tax-deferred account like an IRA creates 'tax deferral on tax deferral,' meaning the investor pays insurance and mortality charges without receiving additional tax benefit, which is a core suitability concern under Regulation Best Interest.

Series 6 Exam Questions & Answers 2026 (11–20)

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