Finra Exam Series-6 Topic 5 Question 91 Discussion

Actual exam question for Finra's Series-6 exam

Question #: 91
Topic #: 5

Which of the following statements regarding the separate account of an insurance company is true?

AThe monies in the separate account are used to make payments to all the policyholders of the company when a payment is triggered.

BThe separate account contains the monies from which the company pays its operating expenses, e.g., salaries, etc.

CFunds from the separate account are used to make payments to fixed annuity investors.

DThe separate account must register as an investment company under the Investment Company Act of 1940.

Show Suggested Answer

Suggested Answer: D

The true statement is that the separate account must register as an investment company under the Investment Company Act of 1940. The premiums paid by investors for variable life insurance (less numerous charges) are invested in subaccounts within the separate account, and the earnings of the subaccounts are used, in turn, to make payments to the owners of variable life insurance policies, but not to any of the other policyholders of the company, such as the fixed annuity investors. The insurance company pays its operating expenses out of its general account.

by Willow at Sep 19, 2024, 06:20 PM

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Latanya

2 months ago

Separate accounts are all about keeping policyholder funds separate, so A seems like the obvious choice. Why else would they have a 'separate' account?

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Vanda

8 days ago

Kimbery: So, we all agree that the separate account is used for policyholder payments, right?

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Daniela

17 days ago

User 3: Yeah, A makes the most sense. It's all about keeping policyholder funds separate.

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Kimbery

22 days ago

User 2: I agree, it wouldn't make sense for it to be used for operating expenses.

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Becky

24 days ago

User 1: I think A is correct. The separate account is for policyholder payments.

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Nieves

2 months ago

Haha, I bet the insurance company wishes the separate account was for their salaries! But seriously, I think D is the correct answer here.

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Isadora

18 days ago

D) The separate account must register as an investment company under the Investment Company Act of 1940.

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Julieta

19 days ago

C) Funds from the separate account are used to make payments to fixed annuity investors.

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Michell

30 days ago

A) The monies in the separate account are used to make payments to all the policyholders of the company when a payment is triggered.

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Domonique

2 months ago

Hmm, I'm not sure about this one. I was always told the separate account was for the company's expenses, so I'd go with B.

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Erick

28 days ago

User 4: I think the separate account must register as an investment company, so I'll pick D.

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Mitsue

1 months ago

I'm not sure about this either, but I think D is the correct answer because of the registration requirement.

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Zoila

1 months ago

I'm not sure, but I think it's used for the company's operating expenses, so I'll go with B.

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Erin

2 months ago

I believe the separate account is for paying fixed annuity investors, so I choose C.

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Leila

2 months ago

I believe the separate account is specifically for fixed annuity investors, so I would pick C.

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Wilda

2 months ago

I think the separate account is actually used to make payments to all the policyholders, so I would choose A.

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Shad

2 months ago

I think the separate account is used to make payments to all the policyholders, so I'd go with A.

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Bulah

2 months ago

But doesn't the separate account only pay fixed annuity investors?

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Maxima

3 months ago

A separate account is for variable annuity and life insurance products, so C seems like the right answer to me. The funds are used to make payments to fixed annuity investors.

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Aleta

2 months ago

Yes, C is the right choice. The separate account is not used for operating expenses, but rather for payments to fixed annuity investors.

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Leonida

2 months ago

That makes sense. The funds in the separate account are indeed used to make payments to fixed annuity investors.

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Selma

2 months ago

I agree, C is the correct answer. The separate account is specifically for variable annuity and life insurance products.

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Vanesa

3 months ago

I disagree, I believe the correct answer is C.

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Bulah

3 months ago

I think the answer is A.

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Lindsey

3 months ago

I think the correct answer is D. The separate account must register as an investment company under the Investment Company Act of 1940. This ensures the proper regulation and oversight of the funds in the separate account.

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Brock

2 months ago

I think you're right. It's important for the separate account to be properly regulated.

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Florinda

3 months ago

I believe the correct answer is D.

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