Series 7 Exam Question 232: Answer and Explanation

Question: 232

Which of the following investments requires a registered representative to obtain written verification of an investor's net worth?

• A. Hedge funds
• B. Variable annuities
• C. Direct participation programs
• D. Triple-tax-free municipal bonds

Correct Answer: C

Explanation:

C. Because direct participation programs (limited partnerships) may require limited partners to come up with additional cash beyond their initial investment, investors must provide a written verification of net worth. After the general partner signs the subscription agreement, the investor is accepted as a limited partner.