SIE Understanding Products and Their Risks Practice Question 76

Correct Answer: B

Explanation:

B: Choice B is true because the Securities Act of 1933 determines that REITs are securities, and so a prospectus must be provided to any person who buys ownership when first issued in the primary market. Choice A is incorrect because the following are specifically excluded from FINRA Rule 2310: REITs, Section 401 plans, Section 403(a) plans, Section 403(b) plans, and Section 408 IRA plans. Choice C is incorrect because REITs were not covered in the 1940 act that regulates mutual funds. Choice D is incorrect because a primary advantage of REITs is that, if certain Internal Revenue Code conditions are met, the tax efficiency of REITs may be considered superior to mutual funds, whose ordinary dividends and interest payments and capital gains are taxed at the individual level, as well as at the corporate level.