Prospectus

The Securities Act of 1933 primarily requires:

1. A.Margin limitsMargin limits come from the Federal Reserve under authority granted by the 1934 Act. The 1933 Act concerns disclosure at the moment a security is first offered.
2. B.Regulation of secondary trading onlySecondary trading is the subject of the 1934 Act. The two statutes divide the ground between them, with 1933 covering the primary offering and 1934 everything afterward.
3. C.Registration and a prospectus for public offeringsCorrect - the 1933 Act is the new-issues/disclosure law.
4. D.Creation of the Federal ReserveThis assigns the wrong institution to the wrong statute. The 1933 Act created no agency; it imposed registration and prospectus obligations on issuers making public offerings.

Why: The 1933 Act governs new issues, requiring registration and prospectus delivery for public offerings (full disclosure).

A mutual fund prospectus must disclose:

1. A.Only the manager's salaryAdviser compensation does appear in fund disclosure documents, so this is not invented out of nothing. It is one line among many: the prospectus must set out the investment objective, principal risks, the full fee table, and past performance.
2. B.Nothing specificThe prospectus is the disclosure document a registered offering is built around, and its required contents are prescribed rather than left to the issuer. Objective, principal risks, fees, and performance history all must appear.
3. C.Each shareholder's nameA prospectus is written for prospective purchasers who do not yet own anything, so listing current holders would serve no purpose. Shareholder identities are confidential account information, not disclosure items.
4. D.The objective, risks, fees, and performanceCorrect - core prospectus disclosures.

Why: The prospectus must disclose the fund's objective, principal risks, fees, and past performance.

Mutual fund sales literature must:

1. A.Omit any risksLeaving risk out is itself a way of misleading. Sales literature must present a balanced picture, and material omissions are treated the same as affirmative misstatements.
2. B.Not be misleading and be preceded or accompanied by a prospectusCorrect - prospectus must accompany sales literature.
3. C.Guarantee returnsNothing in a mutual fund permits a promise of results, and making one in sales material would be a clear violation. Past performance may be shown, with the disclosure that it does not predict future returns.
4. D.Replace the prospectusSales literature and the prospectus serve different functions and one cannot stand in for the other. Literature must be preceded or accompanied by the prospectus, so the customer always receives the full disclosure document alongside the promotional piece.

Why: Sales literature must not be misleading and must be preceded or accompanied by a prospectus.

The prospectus for the Halverson Growth Fund lists a 0.75% 12b-1 fee in the table of annual fund operating expenses. A 12b-1 fee is:

1. A.An annual asset-based charge deducted from fund assetsCorrect - ongoing asset-based fee.
2. B.A redemption penalty onlyA CDSC or a short-term redemption fee is charged on the way out; a 12b-1 fee is charged every year the shares are held. It is deducted from fund assets to pay for distribution and shareholder servicing, whether or not anyone redeems.
3. C.A government taxThe name comes from an SEC rule number, which makes it sound like a government levy. No tax authority receives any of it: the money is deducted from fund assets and paid out for distribution and shareholder servicing.
4. D.A one-time front-end loadBoth are ways of paying for distribution, so they are cousins, but the timing is the distinction. A front-end load is taken once at purchase, while a 12b-1 fee is assessed annually against assets for as long as the shares are held.

Why: A 12b-1 fee is an annual asset-based charge deducted from fund assets for distribution/servicing.