Exam 7

If Brokers, Inc., a broker-dealer registered in this state, refuses to comply with the Administrator's order to retain records for two years longer than required by the Securities Exchange Act of 1934, which of the following statements are true? The securities Administrator cannot require registrants to retain books and records longer than required by the SEC. Brokers, Inc., is not in violation of the Securities Exchange Act of 1934. Both the securities Administrator and Brokers, Inc., are in violation of both the Securities Exchange Act of 1934 and the Uniform Securities Act. Brokers, Inc., must comply with orders issued by state securities regulators, whether or not the orders are in compliance with the NSMIA.

1 and 2

Which of the following transactions are exempt from registration under the Uniform Securities Act? A trustee of a corporation in bankruptcy liquidates securities to satisfy debt holders. An offer of a securities investment is directed to 10 individuals in the state during a 12-month consecutive period. There is a sale of securities by the trustee of the Lorgan Family Children's Trust. Agents for an entrepreneur offer preorganization certificates to fewer than 10 investors in the state for a modest commission.

1 and 2 -- describe why for each

3 types of exempt sales

1. to institutions 2. by fiduciaries 3. unsolicited

Which of the following are exempt from state registration? A common stock traded on the OTC Link whose bonds are listed on the NYSE An isolated nonissuer transaction A transaction by an administrator of an estate A transaction with no commissions, directed by the offeror to no more than 50 persons in the state who buy the security for investment purposes only

2 and 3

Which of the following constitutes a sale of stock? Solicitation of a tender offer by a corporation Gift of assessable stock Purchase of shares through the exercise of a warrant Exchange of shares in a corporate reorganization, such as a merger

2 and 3

Which of the following are regulated under the Securities Exchange Act of 1934? New issues Broker-dealers Securities exchanges

2 and 3 -- act of 1933 covers 1

A transactional exemption would be offered when a sale is made by A) a court-appointed guardian for a minor. B) a broker-dealer. C) an investment adviser. D) a custodian for a minor appointed under the Uniform Transfer to Minors Act.

A -- fiduciary

The powers of the Administrator include the ability to determine A) minimum net worth requirements for agents who exercise discretion. B) minimum net worth requirements for investment advisers. C) maximum net capital requirements for broker-dealers. D) surety bond requirements for investment advisers who do not exercise discretion or maintain custody.

B

Under the provisions of the Uniform Securities Act, which of the following transactions may be made legally with unregistered, nonexempt securities? A) A public offering B) A private placement C) A sale in a discretionary account D) A rights offering

B -- exempt transactino

Which of the following is not a security? A) A variable annuity B) A promissory note with a six-month maturity C) A $1 million whole life insurance policy D) An interest in a real estate condominium sold with a rental pool

C

Which of the following statements is not true? A) Federal covered securities include those registered under the Investment Company Act of 1940. B) Federal covered securities include securities listed on national exchanges. C) Exempt securities must reestablish their exemptions at least annually. D) Transaction exemptions must be established before each transaction.

C

The Uniform Securities Act lists a number of securities that are exempt from both the registration and the advertising filing requirements of the act. Included in that list would be all of the following except A) common stock issued by the Bailey Brothers Building and Loan, organized under the laws of New York State and authorized to do business in this state. B) securities issued by the XYZ Industrial Loan Association organized and supervised under the laws of this state. C) universal life insurance policies issued by insurance companies authorized to do business in the state. D) securities issued by the Podunk and Western Railroad, a regulated common carrier.

C - not a sec

A state-registered investment adviser maintains custody of client funds and securities. On Thursday, the chief financial officer of the firm informs the chief compliance officer that their net worth is $31,578. Under the provisions of the Uniform Securities Act, the firm would A) send a detailed financial report to the Administrator by the close of business Friday. B) do nothing, as their net worth is far in excess of the minimum requirement of $10,000. C) send a detailed financial report to the Administrator by the close of business Monday. D) need to increase its net worth.

C -- notice on Friday, detailed report on Monday

With regard to the state registration requirements of agents of registered broker-dealers, all of the following statements are correct except A) registration is required when they limit their activity to the sale of exempt securities. B) registration is not required in a state where the agent has no place of business and only deals with existing clients who are vacationing in that state. C) registration is required if they solicit the sale of securities by telephone to fewer than six individuals residing in that state. D) registration is required in each state in which the employing broker-dealer has a place of business.

D

any stock traded on a national exchange is

exempt

Nobody Walks Motor Company, a licensed automobile dealer, is running a promotion offering anyone who purchases a car over the weekend a $1,000 corporate bond at no additional cost. Under the Uniform Securities Act, in order to make this offer,

motor co must be registered as BD in the state

A securities transaction where there is no benefit to the issuer is called

nonissuer transaction

There are a number of different ways in which a business may be structured. For tax purposes, which form is taxed on its income?

sole proprietorship

USATrade Securities, a FINRA member broker-dealer, is registered in 10 Midwest states. Regarding financial requirements, USATrade must meet those of

the SEC -- FINRA -> SEC

Which of the following investment adviser compensation arrangements is permitted under the Uniform Securities Act? The value of a client's account at the start of the year is subtracted from the value at the end of the year. The adviser's compensation is 5% of the difference. The adviser charges an annual fee of $2,000, but the agreement calls for a waiver of the fee if the client's portfolio value has not increased by at least $20,000. The adviser charges a fee of 1% of the average value of the account portfolio during the year. The adviser charges a flat fee of $1,000 if the client's portfolio assets are $100,000 or more or $2,000 if the client's assets increase to $200,000 or more.

3 and 4

First Fidelity Building and Loan Association, organized in State A and authorized to do business in State B, has an offering of common stock being made in State B. In order for an individual selling the offering to be excluded from the definition of agent in State B, the individual A) cannot sell without being an agent. B) would have to be employed by a broker-dealer registered in the other state. C) would have to be employed by a broker-dealer registered in this state. D) would have to be employed by First Fidelity.

A

Which of the following is not considered to be in the business of investment advising? A) A financial planner who provides advice on many types of financial instruments, including securities, and receives commissions on the sale of life insurance B) A person who prepares reports about securities in general C) An insurance agent who discusses the merits of whole life insurance verses nonsecurities financial instruments and who receives commissions on the sale of life insurance only D) An insurance agent who provides investment advice regularly, but such advice represents a small portion of her business

C

Which of the following are features of Class C mutual fund shares? Typically charge no front-end load Typically charge a front-end load Typically impose lower CDSCs than Class B shares for a shorter period Typically convert to Class A shares after they are held for a defined period

1 and 3

An agent in this state would be acting illegally if he sold A) nonexempt securities properly registered in a neighboring state but not registered in this state. B) revenue bonds of Illinois in Florida that were not registered in Florida. C) securities guaranteed by a federal credit union organized under the laws of the state. D) federal covered securities not registered in the state.

A

Which of the following transactions is not exempt from the registration requirements of the Uniform Securities Act? A) Transactions by an executor, administrator, sheriff, or receiver in bankruptcy B) Solicited transactions in a nonexempt security C) Transactions between an issuer and an underwriter or among underwriters D) An isolated nonissuer transaction

B