SIE Understanding Products and Their Risks Question 63: Answer and Explanation

Question: 63

Which of the following qualifies as a direct participation program?

• A. Real estate investment trust
• B. Subchapter S corporation
• C. Internal Revenue Code 401 and 403(a) tax qualified pension and profit sharing plan
• D. Internal Revenue Code 403(b) tax sheltered annuity

Correct Answer: B

Explanation:

B: Choice B is correct because Subchapter S corporations and similar investments are included in the definition of direct participation program (DPP), no matter what industry is involved. Choices A, C, and D are incorrect because they are specifically excluded by the text of FINRA Rule 2310, which defines a direct participation program, as mentioned in the Securities Act of 1933.