Series 7 Exam Question 61: Answer and Explanation

Question: 61

All of the following are TRUE of a Letter of Intent (LOI) EXCEPT

• A. It is valid for 13 months
• B. It may be backdated for up to 60 days
• C. Investors receive breakpoints as soon as the Letter of Intent is signed
• D. Shares may be held in escrow in case the full payment is not made

Correct Answer: B

Explanation:

B. When investors sign a Letter of Intent (LOI), it allows investors to receive a breakpoint (discounted sales charge) right away even if they haven't deposited enough money to receive a breakpoint. LOIs can be backdated up to 90 days, not 60, meaning they can apply to a previous purchase. They are valid for 13 months, meaning that investors have up to 13 months to deposit enough to receive a discounted sales charge. The issuer may hold shares in escrow in the event that the full payment isn't made.