Question

Which of the following would NASAA consider to be a substantial prepayment of fees?

A) $600 covering the entire contract year
B) $500 covering the next 6 months
C) $1,000 covering the next month
D) $600 covering the next calendar quarter

Answer 1

NASAA would likely consider Option C, a payment of $1,000 covering the next month, as a substantial prepayment of fees because it is a large amount for a short service period.

Step-by-step explanation:

The North American Securities Administrators Association (NASAA) has guidelines for what would be considered a substantial prepayment of fees. In assessing the options provided:

• Option A: $600 covering the entire contract year may not be considered substantial if the amount aligns with the duration of service.
• Option B: $500 covering the next 6 months also may not be substantial depending on the services provided during that timeframe.
• Option C: $1,000 covering the next month is likely considered a substantial prepayment since the amount is high for a very short period, exceeding expectations of regular payments.
• Option D: $600 covering the next calendar quarter may not be seen as substantial if it's in accordance with the service period and expected costs.

Hence, NASAA would most likely consider Option C to be a substantial prepayment because it represents a significant amount of money paid for a relatively short service period.