Apply Product Advertising Rules - Series 7

1. What must a municipal fund (or muni bond) communication disclose about call features when relevant?

   That bonds may be called prior to maturity, affecting yield and return. MSRB mandates this to highlight call risk, which can reduce expected yield through early redemption of the bonds.

2. What additional money market disclosure is required regarding maintaining a stable $1.00$ NAV?

   The fund seeks to maintain $1.00$ NAV but it is possible to lose money. This warning is required to disclose the risk of principal loss despite the fund's objective of stable net asset value.

3. What must be included if an options communication references a specific strategy's potential outcome?

   Material risks and limitations of that strategy. Regulations require this inclusion to provide a complete and balanced view, enabling informed assessment of the strategy's suitability.

4. What disclosure is required when presenting money market fund yields in communications?

   An investment in a money market fund is not insured or guaranteed. SEC mandates this to differentiate money market funds from insured bank products, highlighting their investment risk.

5. Identify the disclosure that must accompany any options performance discussion using past results.

   Past performance is not indicative of future results. Regulations mandate this disclaimer to prevent misleading investors by clarifying that historical options performance does not predict future outcomes.

6. Which statement is required when a municipal communication implies safety similar to bank deposits?

   Municipal securities are not FDIC insured and can lose value. This disclosure counters implications of safety by clarifying lack of federal insurance and potential for value fluctuation.

7. What must be disclosed when an options communication discusses margin or leverage effects?

   That margin/leverage can increase losses as well as gains. This balanced disclosure is required to inform investors of the amplified risks associated with using margin or leverage in options trading.

8. Which disclosure is required in municipal security communications about tax-free interest?

   Tax-exempt status depends on investor circumstances and may change. MSRB rules require this to inform that tax benefits vary by individual situation and could be altered by future tax law changes.

9. What must a mutual fund ad disclose if it presents performance that is current only to a past date?

   A source to obtain current performance (e.g., website or phone number). This requirement ensures investors can access up-to-date data, preventing reliance on potentially outdated performance figures in ads.

10. Which statement must appear in variable annuity subaccount performance ads about separate accounts?

    Performance is that of the underlying subaccount, not the insurance company. This clarification is required to distinguish subaccount investment results from the overall variable annuity, which includes additional fees.

11. What must a retail communication about options include regarding the ODD before or at approval?

    Statement that the ODD is available and must be furnished before trading. This disclosure ensures investors are aware of the mandatory provision of the Options Disclosure Document to understand risks before options trading approval.

12. Which statement is required when mutual fund performance is shown for a period under $1$ year?

    Performance for periods under $1$ year must be shown as total return. SEC rules mandate total return presentation for short periods to avoid misleading annualization that could exaggerate fund performance.

13. What must be stated in a mutual fund ad that mentions yield or income distributions?

    Yield/distributions are not guaranteed and may change. This disclaimer is mandated to inform that mutual fund yields can fluctuate due to market conditions and are not assured.

14. Which disclosure is required when municipal securities are described as "insured" or "guaranteed"?

    Identify the insurer/guarantor and that insurance covers timely payment, not market value. Regulations require specifying the guarantor and limiting coverage to payment defaults, not protection against market value declines.

15. What must be disclosed when a municipal bond is subject to the Alternative Minimum Tax (AMT)?

    Interest may be subject to AMT. For bonds subject to AMT, disclosure is mandated to alert investors to potential inclusion in alternative minimum tax calculations.

16. Which communication is generally prohibited: highlighting options rewards without balanced risk disclosure?

    An unbalanced options communication (benefits without risks). FINRA prohibits such communications to ensure investors receive a fair representation of both potential rewards and inherent risks in options.

17. Which disclosure is required in mutual fund communications about the effect of sales charges on returns?

    Returns reflect deduction of maximum sales charge (if applicable). SEC regulations require this to present net returns accurately, reflecting the impact of sales loads on investor outcomes.

18. Identify the required disclosure when a municipal security is sold at a premium or discount.

    Premium/discount may affect tax treatment (amortization/accretion). MSRB requires this to explain tax implications like basis adjustments that affect capital gains or losses on such securities.

19. What is the required disclosure name for a standardized options brochure given to customers?

    Characteristics and Risks of Standardized Options (ODD). This is the official title of the brochure mandated by regulators to disclose key features and risks of standardized options to potential traders.

20. Identify the required disclosure when a mutual fund ad discusses tax-exempt income.

    Tax-exempt income may be subject to AMT and state/local taxes. Regulations require this to alert investors to potential alternative minimum tax and other tax implications on supposedly exempt income.

21. Identify the required action if a retail communication about munis contains a yield comparison to taxable bonds.

    Disclose assumptions and that the comparison depends on the investor's tax bracket. MSRB requires revealing assumptions to ensure fair comparisons, as tax-equivalent yields vary with individual tax situations.

22. What must a mutual fund communication include when it is an offer to sell fund shares?

    A prospectus must be provided (or how to obtain it) before investing. SEC rules mandate prospectus availability to provide detailed fund information for informed investment decisions prior to purchase.

23. Which FINRA document must a customer receive at or before approval to trade options?

    Options Disclosure Document (ODD). FINRA rules require delivery of this document to inform customers of options' characteristics and risks prior to account approval for trading.

24. What must be disclosed in communications about municipal revenue bonds regarding source of repayment?

    That repayment is from specified revenues, not the issuer's taxing power. MSRB rules mandate this to distinguish revenue bonds from general obligation bonds, emphasizing reliance on project-specific income.

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