Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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1.
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Which of the following is the foundation of ethics
for the financial services practitioner?
a. | The Golden Rule | b. | The legal system | c. | Force | d. | Compliance
requirements |
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2.
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What is the result of increased professional status
for the insurance agent?
a. | increased liability | b. | continuation of the agency distribution system. | c. | Both A and B | d. | neither A nor
B |
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3.
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Which of the following is a fundamental method of
resolving disputes?
a. | Reason | b. | Force | c. | Both A and
B | d. | neither A nor B |
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4.
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What is the common thread in unethical
practices?
a. | The practices are illegal | b. | They mislead the customer | c. | They lead to the customer's monetary loss | d. | They are forbidden by all insurers |
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5.
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Which of the following is NOT a necessary
component of a profession?
a. | Specialized knowledge | b. | Service before income outlook | c. | Opportunity for substantial income | d. | A code of professional ethics |
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6.
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Which of the following is NOT a role of the
states in regulation of the insurance industry?
a. | Agent Licensing | b. | Supervising company sales practices | c. | Licensing insurers | d. | Promulgating
pension regulations |
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7.
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Which of the following is NOT a way in which the
federal government influences the insurance industry?
a. | through income taxation of cash
values | b. | through the licensing of
insurers | c. | through health insurance
legislation | d. | through its
regulation of insurance products considered securities |
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8.
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The federal government retains the power to
control the insurance under _______ to the extent that the issues involved are deemed national in
character.
a. | ERISA | b. | TEFRA | c. | the
McCarran-Ferguson Act | d. | the U.S. Claims
Court |
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9.
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Which of the following is NOT an authority
conferred under law of agency?
a. | Express authority | b. | Suggested authority | c. | Implied
authority | d. | Apparent
authority |
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10.
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The subsequent confirmation or approval of an
agent's unauthorized actions is known as:
a. | disintermediation | b. | ratification | c. | brokering | d. | pyramiding |
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11.
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The term "sales tools" includes
everything that the agent uses to:
a. | create interest in purchasing a
product | b. | create interest in keeping a purchased
product | c. | both a and b | d. | neither a nor b |
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12.
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Shirley Whitcomb is a certified financial planner
whose business card and letterhead identify her as "Shirley Whitcomb & Associates, Certified
Financial Planners". Under what circumstances would Shirley's business card and letterhead
be acceptable?
a. | If Shirley was a CFP | b. | If Shirley and all of her associates were CFPs | c. | If one or more of Shirley’s associates were
CFP | d. | If Shirley and all of her associates and all assists
were CFPs |
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13.
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What licensing or registration is generally
required before an insurance agent may refer to him or herself as a financial
planner?
a. | The agent must have a Series 63
registration | b. | The agent must be
a CLU | c. | The agent must be a registered investment
advisor | d. | The agent must be Series 6
registered |
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14.
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What are the areas that may be ethical concerns in
the use of personal brochures?
a. | Claiming expertise or education not
possessed | b. | Misstating personal or professional
accomplishments | c. | Failure to include
material information | d. | All of the
above |
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15.
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What is potentially the most serious ethical
issue in the approach step of the sales process?
a. | The practitioner's discussion of a product over the
telephone | b. | The practitioner's stating or implying that he or
she has skills, experience or credentials that are not possessed | c. | The practitioner's failure to provide a complete
comparison | d. | The
practitioner's failure to provide full disclosure |
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16.
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What is the ethical concern in referring to a life
insurance policy as a "private pension"?
a. | The term obscures the true identity and nature of the
product | b. | The product would need to be governed by ERISA
Legislation | c. | Private pensions
refer only to modified endowment contracts | d. | There is no
ethical concern in referring to a life insurance policy as a private
pension |
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17.
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What is generally the first substantive
interview in the life insurance sales process?
a. | The approach | b. | The fact-finding interview | c. | The closing interview | d. | The delivery
interview |
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18.
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What is (are) the principal ethical concern(s) in
the presentation step of the sales process?
a. | Selection of the appropriate
product | b. | Communication about the recommended
product | c. | Both a and b | d. | Neither a nor b |
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19.
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Which of the following is the LEAST unethical
practice?
a. | Churning | b. | Rebating | c. | Misrepresentation | d. | Replacement |
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20.
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Jim Whelan promised his golf partner that he
would pay the fees for the next round of golf if his partner would buy a life insurance policy.
Realizing he needed life insurance anyway, his partner bought a policy. What, if any ethical issues
are involved?
a. | Jim is guilty of rebating, which is both unethical and
illegal | b. | Jim is guilty of rebating only if he actually paid the
golf fees | c. | Since the partner needed life insurance anyway, no
ethical or legal issue is involved | d. | Jim would be
guilty of rebating only if the gulf fees exceeded $100. |
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21.
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Which of the following would NOT be a possible
result of a life insurance replacement?
a. | Suicide and incontestable provisions begin
anew | b. | Original policy's cost basis could be
lost | c. | Death benefit proceeds would become income
taxable | d. | Any gain might need to be immediately
recognized |
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22.
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What steps are generally involved in the ethical
audit of a life insurance agent's practice?
a. | Identifying sales tools and practices
used | b. | Evaluating the sales tools and practices
used | c. | Changing unethical or non-compliant tools or
practices | d. | All of the above |
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23.
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Which of the following is NOT a general
principle concerning communications with a prospect?
a. | Communications must be honest | b. | Communications must convey information fully and
fairly | c. | Communications must contain all material
information | d. | Communications
must not mislead |
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24.
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Which of the following are of importance in terms
of ethics and compliance?
a. | The manner in which the practitioner identifies
products | b. | The manner in which a practitioner identifies him or
herself | c. | The manner in which a product's features and
benefits are presented | d. | All of the
above |
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25.
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Which of the following is NOT a method by which
an agent may turn his or her ethical practice into a marketing advantage?
a. | Be proactive | b. | Bring up the prospect's attitude about the
industry | c. | Use open-ended questions to uncover the prospect's
feelings | d. | Avoid discussion of the ethical issues in the industry
unless the prospect bring them up |
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